Correlation Between Redwood Trust and Ready Capital
Can any of the company-specific risk be diversified away by investing in both Redwood Trust 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 Redwood Trust and Ready Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Trust and Ready Capital Corp, you can compare the effects of market volatilities on Redwood Trust 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 Redwood Trust with a short position of Ready Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Trust and Ready Capital.
Diversification Opportunities for Redwood Trust and Ready Capital
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Redwood and Ready is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Trust and Ready Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital Corp and Redwood Trust 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 Redwood Trust 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 Corp has no effect on the direction of Redwood Trust i.e., Redwood Trust and Ready Capital go up and down completely randomly.
Pair Corralation between Redwood Trust and Ready Capital
Considering the 90-day investment horizon Redwood Trust is expected to generate 1.03 times more return on investment than Ready Capital. However, Redwood Trust is 1.03 times more volatile than Ready Capital Corp. It trades about 0.01 of its potential returns per unit of risk. Ready Capital Corp is currently generating about -0.02 per unit of risk. If you would invest 621.00 in Redwood Trust on November 19, 2024 and sell it today you would earn a total of 17.00 from holding Redwood Trust or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Trust vs. Ready Capital Corp
Performance |
| Timeline |
| Redwood Trust |
| Ready Capital Corp |
Redwood Trust and Ready Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Trust and Ready Capital
The main advantage of trading using opposite Redwood Trust and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Trust 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.| Redwood Trust vs. Two Harbors Investments | Redwood Trust vs. AG Mortgage Investment | Redwood Trust vs. Invesco Mortgage Capital | Redwood Trust vs. MFA Financial |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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