Correlation Between Rithm Capital and Lifco AB

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

By analyzing existing cross correlation between Rithm Capital Corp and Lifco AB, you can compare the effects of market volatilities on Rithm Capital and Lifco AB 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 Rithm Capital with a short position of Lifco AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Capital and Lifco AB.

Diversification Opportunities for Rithm Capital and Lifco AB

-0.25

Correlation Coefficient

Rithm Capital  Lifco AB

Very good diversification

The 3 months correlation between Rithm and Lifco is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Lifco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifco AB and Rithm 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 Rithm Capital Corp are associated (or correlated) with Lifco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifco AB has no effect on the direction of Rithm Capital i.e., Rithm Capital and Lifco AB go up and down completely randomly.

Pair Corralation between Rithm Capital and Lifco AB

Assuming the 90 days trading horizon Rithm Capital is expected to generate 14.48 times less return on investment than Lifco AB. But when comparing it to its historical volatility, Rithm Capital Corp is 18.01 times less risky than Lifco AB. It trades about 0.18 of its potential returns per unit of risk. Lifco AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,448  in Lifco AB on October 27, 2024 and sell it today you would earn a total of  202.00  from holding Lifco AB or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Rithm Capital Corp  vs.  Lifco AB

Rithm Capital Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Rithm Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lifco AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lifco AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental drivers, Lifco AB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Rithm Capital and Lifco AB

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

The idea behind Rithm Capital Corp and Lifco AB 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.