Correlation Between TPG RE and Rithm Capital
Can any of the company-specific risk be diversified away by investing in both TPG RE and Rithm 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 TPG RE and Rithm Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPG RE Finance and Rithm Capital Corp, you can compare the effects of market volatilities on TPG RE and Rithm 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 TPG RE with a short position of Rithm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG RE and Rithm Capital.
Diversification Opportunities for TPG RE and Rithm Capital
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TPG and Rithm is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance and Rithm Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm Capital Corp and TPG RE 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 TPG RE Finance are associated (or correlated) with Rithm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Capital Corp has no effect on the direction of TPG RE i.e., TPG RE and Rithm Capital go up and down completely randomly.
Pair Corralation between TPG RE and Rithm Capital
Assuming the 90 days trading horizon TPG RE Finance is expected to under-perform the Rithm Capital. In addition to that, TPG RE is 3.89 times more volatile than Rithm Capital Corp. It trades about -0.02 of its total potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.06 per unit of volatility. If you would invest 2,523 in Rithm Capital Corp on August 27, 2024 and sell it today you would earn a total of 7.00 from holding Rithm Capital Corp or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TPG RE Finance vs. Rithm Capital Corp
Performance |
| Timeline |
| TPG RE Finance |
| Rithm Capital Corp |
TPG RE and Rithm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG RE and Rithm Capital
The main advantage of trading using opposite TPG RE and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG RE position performs unexpectedly, Rithm 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 Rithm Capital will offset losses from the drop in Rithm Capital's long position.The idea behind TPG RE Finance and Rithm Capital Corp 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.| Rithm Capital vs. Rithm Capital Corp | Rithm Capital vs. PennyMac Mortgage Investment | Rithm Capital vs. AGNC Investment Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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