Correlation Between Ready Capital and TPG RE
Can any of the company-specific risk be diversified away by investing in both Ready Capital and TPG RE 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 TPG RE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ready Capital and TPG RE Finance, you can compare the effects of market volatilities on Ready Capital and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and TPG RE.
Diversification Opportunities for Ready Capital and TPG RE
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ready and TPG is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of Ready Capital i.e., Ready Capital and TPG RE go up and down completely randomly.
Pair Corralation between Ready Capital and TPG RE
Assuming the 90 days horizon Ready Capital is expected to generate 4.41 times less return on investment than TPG RE. But when comparing it to its historical volatility, Ready Capital is 2.08 times less risky than TPG RE. It trades about 0.06 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,274 in TPG RE Finance on August 27, 2024 and sell it today you would earn a total of 636.00 from holding TPG RE Finance or generate 49.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ready Capital vs. TPG RE Finance
Performance |
| Timeline |
| Ready Capital |
| TPG RE Finance |
Ready Capital and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ready Capital and TPG RE
The main advantage of trading using opposite Ready Capital and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE'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 |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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