Correlation Between Ready Capital and Global X

Can any of the company-specific risk be diversified away by investing in both Ready Capital and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ready Capital and Global X Lithium, you can compare the effects of market volatilities on Ready Capital and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Global X.

Diversification Opportunities for Ready Capital and Global X

0.64

Correlation Coefficient

Ready Capital  Global X

Poor diversification

The 3 months correlation between Ready and Global is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital and Global X Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Lithium 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 are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Lithium has no effect on the direction of Ready Capital i.e., Ready Capital and Global X go up and down completely randomly.

Pair Corralation between Ready Capital and Global X

Considering the 90-day investment horizon Ready Capital is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, Ready Capital is 2.55 times less risky than Global X. The etf trades about -0.09 of its potential returns per unit of risk. The Global X Lithium is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,203  in Global X Lithium on December 20, 2024 and sell it today you would lose (103.00) from holding Global X Lithium or give up 2.45% of portfolio value over 90 days.

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

Ready Capital  vs.  Global X Lithium

Ready Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ready Capital 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.

Global X Lithium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Global X is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ready Capital and Global X

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

The idea behind Ready Capital and Global X Lithium 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.