Correlation Between Ready Capital and MFA Financial
Can any of the company-specific risk be diversified away by investing in both Ready Capital and MFA Financial 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 MFA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ready Capital and MFA Financial, you can compare the effects of market volatilities on Ready Capital and MFA Financial 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 MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and MFA Financial.
Diversification Opportunities for Ready Capital and MFA Financial
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ready and MFA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Ready Capital i.e., Ready Capital and MFA Financial go up and down completely randomly.
Pair Corralation between Ready Capital and MFA Financial
Assuming the 90 days horizon Ready Capital is expected to under-perform the MFA Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Ready Capital is 1.24 times less risky than MFA Financial. The preferred stock trades about -0.08 of its potential returns per unit of risk. The MFA Financial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,221 in MFA Financial on August 27, 2024 and sell it today you would lose (3.00) from holding MFA Financial or give up 0.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ready Capital vs. MFA Financial
Performance |
| Timeline |
| Ready Capital |
| MFA Financial |
Ready Capital and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ready Capital and MFA Financial
The main advantage of trading using opposite Ready Capital and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, MFA Financial 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 MFA Financial will offset losses from the drop in MFA Financial'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 |
| MFA Financial vs. New York Mortgage | MFA Financial vs. New York Mortgage | MFA Financial vs. Two Harbors Investment | MFA Financial vs. Two Harbors 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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