Correlation Between RiverNorth Specialty and Ready Capital
Can any of the company-specific risk be diversified away by investing in both RiverNorth Specialty and Ready Capital 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 RiverNorth Specialty and Ready Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RiverNorth Specialty Finance and Ready Capital, you can compare the effects of market volatilities on RiverNorth Specialty and Ready Capital 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 RiverNorth Specialty with a short position of Ready Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of RiverNorth Specialty and Ready Capital.
Diversification Opportunities for RiverNorth Specialty and Ready Capital
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RiverNorth and Ready is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorth Specialty Finance and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital and RiverNorth Specialty 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 RiverNorth Specialty Finance are associated (or correlated) with Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital has no effect on the direction of RiverNorth Specialty i.e., RiverNorth Specialty and Ready Capital go up and down completely randomly.
Pair Corralation between RiverNorth Specialty and Ready Capital
Considering the 90-day investment horizon RiverNorth Specialty Finance is expected to generate 1.38 times more return on investment than Ready Capital. However, RiverNorth Specialty is 1.38 times more volatile than Ready Capital. It trades about -0.01 of its potential returns per unit of risk. Ready Capital is currently generating about -0.02 per unit of risk. If you would invest 1,526 in RiverNorth Specialty Finance on August 29, 2024 and sell it today you would lose (1.00) from holding RiverNorth Specialty Finance or give up 0.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RiverNorth Specialty Finance vs. Ready Capital
Performance |
| Timeline |
| RiverNorth Specialty |
| Ready Capital |
RiverNorth Specialty and Ready Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RiverNorth Specialty and Ready Capital
The main advantage of trading using opposite RiverNorth Specialty and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RiverNorth Specialty position performs unexpectedly, Ready Capital 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 Ready Capital will offset losses from the drop in Ready Capital's long position.The idea behind RiverNorth Specialty Finance and Ready Capital 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.
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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