Correlation Between Ready Capital and Lument Finance
Can any of the company-specific risk be diversified away by investing in both Ready Capital 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 Ready Capital and Lument Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ready Capital and Lument Finance Trust, you can compare the effects of market volatilities on Ready Capital 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 Ready Capital with a short position of Lument Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Lument Finance.
Diversification Opportunities for Ready Capital and Lument Finance
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ready and Lument is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital 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 Ready 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 Ready Capital 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 Ready Capital i.e., Ready Capital and Lument Finance go up and down completely randomly.
Pair Corralation between Ready Capital and Lument Finance
Assuming the 90 days horizon Ready Capital is expected to generate 2.34 times less return on investment than Lument Finance. But when comparing it to its historical volatility, Ready Capital is 2.55 times less risky than Lument Finance. It trades about 0.07 of its potential returns per unit of risk. Lument Finance Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,514 in Lument Finance Trust on August 27, 2024 and sell it today you would earn a total of 731.00 from holding Lument Finance Trust or generate 48.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.46% |
| Values | Daily Returns |
Ready Capital vs. Lument Finance Trust
Performance |
| Timeline |
| Ready Capital |
| Lument Finance Trust |
Ready Capital and Lument Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ready Capital and Lument Finance
The main advantage of trading using opposite Ready Capital and Lument Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital 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.| Ready Capital vs. PennyMac Mortgage Investment | Ready Capital vs. ARMOUR Residential REIT | Ready Capital vs. Rithm Capital Corp | Ready Capital vs. Dynex Capital |
| Lument Finance vs. Rithm Capital Corp | Lument Finance vs. PennyMac Mortgage Investment | Lument Finance vs. AGNC Investment Corp |
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.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |