Correlation Between Rithm Property and Firm Capital

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

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

Diversification Opportunities for Rithm Property and Firm Capital

0.69

Correlation Coefficient

Rithm Property  Firm Capital

Poor diversification

The 3 months correlation between Rithm and Firm is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Property Trust and Firm Capital Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Property and Rithm Property 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 Property Trust are associated (or correlated) with Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Property has no effect on the direction of Rithm Property i.e., Rithm Property and Firm Capital go up and down completely randomly.

Pair Corralation between Rithm Property and Firm Capital

Considering the 90-day investment horizon Rithm Property Trust is expected to generate 1.29 times more return on investment than Firm Capital. However, Rithm Property is 1.29 times more volatile than Firm Capital Property. It trades about 0.08 of its potential returns per unit of risk. Firm Capital Property is currently generating about 0.05 per unit of risk. If you would invest  294.00  in Rithm Property Trust on December 3, 2024 and sell it today you would earn a total of  34.00  from holding Rithm Property Trust or generate 11.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Rithm Property Trust  vs.  Firm Capital Property

Rithm Property Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Property Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Rithm Property unveiled solid returns over the last few months and may actually be approaching a breakup point.

Firm Capital Property

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Firm Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rithm Property and Firm Capital

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

The idea behind Rithm Property Trust and Firm Capital Property 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.