Correlation Between Ready Capital and Victory Capital

Can any of the company-specific risk be diversified away by investing in both Ready Capital and Victory Capital 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 Victory Capital 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 Victory Capital Holdings, you can compare the effects of market volatilities on Ready Capital and Victory Capital 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 Victory Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Victory Capital.

Diversification Opportunities for Ready Capital and Victory Capital

-0.48

Correlation Coefficient

Ready Capital  Victory Capital

Very good diversification

The 3 months correlation between Ready and Victory is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Victory Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Capital Holdings 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 Victory Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Capital Holdings has no effect on the direction of Ready Capital i.e., Ready Capital and Victory Capital go up and down completely randomly.

Pair Corralation between Ready Capital and Victory Capital

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the Victory Capital. But the stock apears to be less risky and, when comparing its historical volatility, Ready Capital Corp is 1.35 times less risky than Victory Capital. The stock trades about -0.06 of its potential returns per unit of risk. The Victory Capital Holdings is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5,242  in Victory Capital Holdings on September 1, 2024 and sell it today you would earn a total of  1,706  from holding Victory Capital Holdings or generate 32.54% return on investment over 90 days.

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

Ready Capital Corp  vs.  Victory Capital Holdings

Ready Capital Corp

Risk-Adjusted Performance

0 of 100

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.

Victory Capital Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Capital Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Victory Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ready Capital and Victory Capital

The main advantage of trading using opposite Ready Capital and Victory Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, Victory Capital 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 Victory Capital will offset losses from the drop in Victory Capital's long position.

The idea behind Ready Capital Corp and Victory Capital Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.