Correlation Between Cherry Hill and Ready Capital
Can any of the company-specific risk be diversified away by investing in both Cherry Hill and Ready 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 Cherry Hill and Ready Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cherry Hill Mortgage and Ready Capital, you can compare the effects of market volatilities on Cherry Hill and Ready 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 Cherry Hill with a short position of Ready Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cherry Hill and Ready Capital.
Diversification Opportunities for Cherry Hill and Ready Capital
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cherry and Ready is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital and Cherry Hill 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 Cherry Hill Mortgage are associated (or correlated) with Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital has no effect on the direction of Cherry Hill i.e., Cherry Hill and Ready Capital go up and down completely randomly.
Pair Corralation between Cherry Hill and Ready Capital
Assuming the 90 days trading horizon Cherry Hill Mortgage is expected to under-perform the Ready Capital. In addition to that, Cherry Hill is 1.05 times more volatile than Ready Capital. It trades about -0.3 of its total potential returns per unit of risk. Ready Capital is currently generating about -0.08 per unit of volatility. If you would invest 1,918 in Ready Capital on August 27, 2024 and sell it today you would lose (21.00) from holding Ready Capital or give up 1.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cherry Hill Mortgage vs. Ready Capital
Performance |
| Timeline |
| Cherry Hill Mortgage |
| Ready Capital |
Cherry Hill and Ready Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cherry Hill and Ready Capital
The main advantage of trading using opposite Cherry Hill and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill position performs unexpectedly, Ready 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 Ready Capital will offset losses from the drop in Ready Capital's long position.| Cherry Hill vs. Annaly Capital Management | Cherry Hill vs. AGNC Investment Corp | Cherry Hill vs. Invesco Mortgage Capital | Cherry Hill vs. Invesco Mortgage Capital |
| Ready Capital vs. PennyMac Mortgage Investment | Ready Capital vs. ARMOUR Residential REIT | Ready Capital vs. Rithm Capital Corp | Ready Capital vs. Dynex Capital |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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