Correlation Between Cherry Hill and Ready Capital

Can any of the company-specific risk be diversified away by investing in both Cherry Hill 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 Cherry Hill and Ready Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cherry Hill Mortgage and Ready Capital, you can compare the effects of market volatilities on Cherry Hill 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 Cherry Hill with a short position of Ready Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cherry Hill and Ready Capital.

Diversification Opportunities for Cherry Hill and Ready Capital

0.62

Correlation Coefficient

Cherry Hill  Ready Capital

Poor diversification

The 3 months correlation between Cherry and Ready is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital and Cherry Hill 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 Cherry Hill Mortgage 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 Cherry Hill i.e., Cherry Hill and Ready Capital go up and down completely randomly.

Pair Corralation between Cherry Hill and Ready Capital

Assuming the 90 days trading horizon Cherry Hill is expected to generate 1.42 times less return on investment than Ready Capital. But when comparing it to its historical volatility, Cherry Hill Mortgage is 1.53 times less risky than Ready Capital. It trades about 0.07 of its potential returns per unit of risk. Ready Capital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,750  in Ready Capital on August 27, 2024 and sell it today you would earn a total of  147.00  from holding Ready Capital or generate 8.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cherry Hill Mortgage  vs.  Ready Capital

Cherry Hill Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Cherry Hill is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ready Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ready Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ready Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cherry Hill and Ready Capital

The main advantage of trading using opposite Cherry Hill and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill 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 Cherry Hill Mortgage 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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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 Commodity Directory module to find actively traded commodities issued by global exchanges.