Correlation Between Rithm Property and Lument Finance

Can any of the company-specific risk be diversified away by investing in both Rithm Property and Lument Finance 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 Lument Finance 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 Lument Finance Trust, you can compare the effects of market volatilities on Rithm Property and Lument Finance 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 Lument Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Property and Lument Finance.

Diversification Opportunities for Rithm Property and Lument Finance

-0.37

Correlation Coefficient

Rithm Property  Lument Finance

Very good diversification

The 3 months correlation between Rithm and Lument is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Property Trust and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust 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 Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Rithm Property i.e., Rithm Property and Lument Finance go up and down completely randomly.

Pair Corralation between Rithm Property and Lument Finance

Considering the 90-day investment horizon Rithm Property Trust is expected to under-perform the Lument Finance. But the stock apears to be less risky and, when comparing its historical volatility, Rithm Property Trust is 1.35 times less risky than Lument Finance. The stock trades about -0.04 of its potential returns per unit of risk. The Lument Finance Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,044  in Lument Finance Trust on September 26, 2024 and sell it today you would earn a total of  286.00  from holding Lument Finance Trust or generate 13.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.18%
Values	Daily Returns

Rithm Property Trust  vs.  Lument Finance Trust

Rithm Property Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lument Finance Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lument Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rithm Property and Lument Finance

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

The idea behind Rithm Property Trust and Lument Finance Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.