Correlation Between Rithm Capital and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both Rithm Capital and Chimera Investment 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 Rithm Capital and Chimera Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rithm Capital Corp and Chimera Investment, you can compare the effects of market volatilities on Rithm Capital and Chimera Investment 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 Rithm Capital with a short position of Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Capital and Chimera Investment.
Diversification Opportunities for Rithm Capital and Chimera Investment
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rithm and Chimera is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment and Rithm 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 Rithm Capital Corp are associated (or correlated) with Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Rithm Capital i.e., Rithm Capital and Chimera Investment go up and down completely randomly.
Pair Corralation between Rithm Capital and Chimera Investment
Assuming the 90 days trading horizon Rithm Capital is expected to generate 1.41 times less return on investment than Chimera Investment. But when comparing it to its historical volatility, Rithm Capital Corp is 1.8 times less risky than Chimera Investment. It trades about 0.15 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,626 in Chimera Investment on August 27, 2024 and sell it today you would earn a total of 778.00 from holding Chimera Investment or generate 47.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rithm Capital Corp vs. Chimera Investment
Performance |
| Timeline |
| Rithm Capital Corp |
| Chimera Investment |
Rithm Capital and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rithm Capital and Chimera Investment
The main advantage of trading using opposite Rithm Capital and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm Capital position performs unexpectedly, Chimera Investment 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 Chimera Investment will offset losses from the drop in Chimera Investment's long position.The idea behind Rithm Capital Corp and Chimera Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Chimera Investment vs. Chimera Investment | Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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