Correlation Between Ready Capital and MidCap Financial
Can any of the company-specific risk be diversified away by investing in both Ready Capital and MidCap 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 MidCap Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ready Capital Corp and MidCap Financial Investment, you can compare the effects of market volatilities on Ready Capital and MidCap 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 MidCap Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and MidCap Financial.
Diversification Opportunities for Ready Capital and MidCap Financial
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ready and MidCap is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and MidCap Financial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MidCap Financial Inv 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 Corp are associated (or correlated) with MidCap Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MidCap Financial Inv has no effect on the direction of Ready Capital i.e., Ready Capital and MidCap Financial go up and down completely randomly.
Pair Corralation between Ready Capital and MidCap Financial
Allowing for the 90-day total investment horizon Ready Capital Corp is expected to generate 3.66 times more return on investment than MidCap Financial. However, Ready Capital is 3.66 times more volatile than MidCap Financial Investment. It trades about 0.23 of its potential returns per unit of risk. MidCap Financial Investment is currently generating about 0.02 per unit of risk. If you would invest 685.00 in Ready Capital Corp on September 1, 2024 and sell it today you would earn a total of 52.00 from holding Ready Capital Corp or generate 7.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ready Capital Corp vs. MidCap Financial Investment
Performance |
| Timeline |
| Ready Capital Corp |
| MidCap Financial Inv |
Ready Capital and MidCap Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ready Capital and MidCap Financial
The main advantage of trading using opposite Ready Capital and MidCap Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, MidCap 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 MidCap Financial will offset losses from the drop in MidCap Financial's long position.| Ready Capital vs. Ellington Residential Mortgage | Ready Capital vs. Ellington Financial | Ready Capital vs. Dynex Capital | Ready Capital vs. Orchid Island Capital |
| MidCap Financial vs. Parker Hannifin | MidCap Financial vs. Weyco Group | MidCap Financial vs. Skechers USA | MidCap Financial vs. Olympic Steel |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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