Correlation Between Ready Capital and XAI Octagon

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

Diversification Opportunities for Ready Capital and XAI Octagon

0.74

Correlation Coefficient

Ready Capital  XAI Octagon

Poor diversification

The 3 months correlation between Ready and XAI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and XAI Octagon Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAI Octagon Floating 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 XAI Octagon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAI Octagon Floating has no effect on the direction of Ready Capital i.e., Ready Capital and XAI Octagon go up and down completely randomly.

Pair Corralation between Ready Capital and XAI Octagon

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the XAI Octagon. In addition to that, Ready Capital is 4.92 times more volatile than XAI Octagon Floating. It trades about -0.12 of its total potential returns per unit of risk. XAI Octagon Floating is currently generating about -0.15 per unit of volatility. If you would invest  646.00  in XAI Octagon Floating on December 26, 2024 and sell it today you would lose (46.00) from holding XAI Octagon Floating or give up 7.12% of portfolio value over 90 days.

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

Ready Capital Corp  vs.  XAI Octagon Floating

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

XAI Octagon Floating

Risk-Adjusted Performance

Very Weak

Over the last 90 days XAI Octagon Floating has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ready Capital and XAI Octagon

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

The idea behind Ready Capital Corp and XAI Octagon Floating 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.