Correlation Between Two Harbors and Rithm Capital
Can any of the company-specific risk be diversified away by investing in both Two Harbors 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 Two Harbors and Rithm Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Two Harbors Investment and Rithm Capital Corp, you can compare the effects of market volatilities on Two Harbors 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 Two Harbors with a short position of Rithm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and Rithm Capital.
Diversification Opportunities for Two Harbors and Rithm Capital
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Two and Rithm is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment 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 Two Harbors 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 Two Harbors Investment 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 Two Harbors i.e., Two Harbors and Rithm Capital go up and down completely randomly.
Pair Corralation between Two Harbors and Rithm Capital
Assuming the 90 days trading horizon Two Harbors is expected to generate 1.06 times less return on investment than Rithm Capital. In addition to that, Two Harbors is 1.03 times more volatile than Rithm Capital Corp. It trades about 0.09 of its total potential returns per unit of risk. Rithm Capital Corp is currently generating about 0.1 per unit of volatility. If you would invest 1,664 in Rithm Capital Corp on August 30, 2024 and sell it today you would earn a total of 872.00 from holding Rithm Capital Corp or generate 52.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Two Harbors Investment vs. Rithm Capital Corp
Performance |
| Timeline |
| Two Harbors Investment |
| Rithm Capital Corp |
Two Harbors and Rithm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and Rithm Capital
The main advantage of trading using opposite Two Harbors and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors 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.| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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