Correlation Between Rithm Capital and CAPITAL

Can any of the company-specific risk be diversified away by investing in both Rithm Capital and 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 Rithm Capital and CAPITAL 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 CAPITAL ONE FINL, you can compare the effects of market volatilities on Rithm Capital and 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 Rithm Capital with a short position of CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Capital and CAPITAL.

Diversification Opportunities for Rithm Capital and CAPITAL

-0.08

Correlation Coefficient

Rithm Capital  CAPITAL

Good diversification

The 3 months correlation between Rithm and CAPITAL is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and CAPITAL ONE FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FINL 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 CAPITAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPITAL ONE FINL has no effect on the direction of Rithm Capital i.e., Rithm Capital and CAPITAL go up and down completely randomly.

Pair Corralation between Rithm Capital and CAPITAL

Assuming the 90 days trading horizon Rithm Capital Corp is expected to generate 0.96 times more return on investment than CAPITAL. However, Rithm Capital Corp is 1.04 times less risky than CAPITAL. It trades about 0.22 of its potential returns per unit of risk. CAPITAL ONE FINL is currently generating about -0.06 per unit of risk. If you would invest  2,423  in Rithm Capital Corp on December 24, 2024 and sell it today you would earn a total of  79.00  from holding Rithm Capital Corp or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Rithm Capital Corp  vs.  CAPITAL ONE FINL

Rithm Capital Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 17 (%) 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.

CAPITAL ONE FINL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rithm Capital and CAPITAL

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

The idea behind Rithm Capital Corp and CAPITAL ONE FINL 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.