Correlation Between Ready Capital and Westwood Holdings
Can any of the company-specific risk be diversified away by investing in both Ready Capital and Westwood Holdings 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 Westwood Holdings 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 Westwood Holdings Group, you can compare the effects of market volatilities on Ready Capital and Westwood Holdings 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 Westwood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Westwood Holdings.
Diversification Opportunities for Ready Capital and Westwood Holdings
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ready and Westwood is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Westwood Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Holdings 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 Westwood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Holdings has no effect on the direction of Ready Capital i.e., Ready Capital and Westwood Holdings go up and down completely randomly.
Pair Corralation between Ready Capital and Westwood Holdings
Allowing for the 90-day total investment horizon Ready Capital is expected to generate 2.95 times less return on investment than Westwood Holdings. But when comparing it to its historical volatility, Ready Capital Corp is 2.01 times less risky than Westwood Holdings. It trades about 0.07 of its potential returns per unit of risk. Westwood Holdings Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,529 in Westwood Holdings Group on November 29, 2024 and sell it today you would earn a total of 81.00 from holding Westwood Holdings Group or generate 5.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ready Capital Corp vs. Westwood Holdings Group
Performance |
| Timeline |
| Ready Capital Corp |
| Westwood Holdings |
Ready Capital and Westwood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ready Capital and Westwood Holdings
The main advantage of trading using opposite Ready Capital and Westwood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, Westwood Holdings 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 Westwood Holdings will offset losses from the drop in Westwood Holdings' long position.| Ready Capital vs. Ellington Residential Mortgage | Ready Capital vs. Ellington Financial | Ready Capital vs. Dynex Capital | Ready Capital vs. Orchid Island Capital |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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