Correlation Between Rithm Capital and TPG RE
Can any of the company-specific risk be diversified away by investing in both Rithm 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 Rithm 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 Rithm Capital Corp and TPG RE Finance, you can compare the effects of market volatilities on Rithm 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 Rithm Capital with a short position of TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rithm Capital and TPG RE.
Diversification Opportunities for Rithm Capital and TPG RE
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rithm and TPG is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp 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 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 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 Rithm Capital i.e., Rithm Capital and TPG RE go up and down completely randomly.
Pair Corralation between Rithm Capital and TPG RE
Assuming the 90 days trading horizon Rithm Capital Corp is expected to generate 0.56 times more return on investment than TPG RE. However, Rithm Capital Corp is 1.8 times less risky than TPG RE. It trades about 0.1 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.05 per unit of risk. If you would invest 1,561 in Rithm Capital Corp on August 30, 2024 and sell it today you would earn a total of 854.00 from holding Rithm Capital Corp or generate 54.71% 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. TPG RE Finance
Performance |
| Timeline |
| Rithm Capital Corp |
| TPG RE Finance |
Rithm Capital and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rithm Capital and TPG RE
The main advantage of trading using opposite Rithm Capital and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rithm 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.| Rithm Capital vs. ACRES Commercial Realty | Rithm Capital vs. Dynex Capital | Rithm Capital vs. PennyMac Mortgage Investment | Rithm Capital vs. AG Mortgage Investment |
| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Dynex Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. AG Mortgage 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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