Correlation Between Ready Capital and Invesco Municipal

Can any of the company-specific risk be diversified away by investing in both Ready Capital and Invesco Municipal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ready Capital and Invesco Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ready Capital Corp and Invesco Municipal Income, you can compare the effects of market volatilities on Ready Capital and Invesco Municipal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ready Capital with a short position of Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Invesco Municipal.

Diversification Opportunities for Ready Capital and Invesco Municipal

0.46

Correlation Coefficient

Ready Capital  Invesco Municipal

Very weak diversification

The 3 months correlation between Ready and Invesco is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Invesco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Income and Ready Capital is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ready Capital Corp are associated (or correlated) with Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Income has no effect on the direction of Ready Capital i.e., Ready Capital and Invesco Municipal go up and down completely randomly.

Pair Corralation between Ready Capital and Invesco Municipal

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to generate 1.91 times more return on investment than Invesco Municipal. However, Ready Capital is 1.91 times more volatile than Invesco Municipal Income. It trades about 0.07 of its potential returns per unit of risk. Invesco Municipal Income is currently generating about 0.1 per unit of risk. If you would invest  679.00  in Ready Capital Corp on November 29, 2024 and sell it today you would earn a total of  12.50  from holding Ready Capital Corp or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ready Capital Corp  vs.  Invesco Municipal Income

Ready Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ready Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ready Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Municipal Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Municipal Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Invesco Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ready Capital and Invesco Municipal

The main advantage of trading using opposite Ready Capital and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, Invesco Municipal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco Municipal will offset losses from the drop in Invesco Municipal's long position.

The idea behind Ready Capital Corp and Invesco Municipal Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.