Correlation Between Ares Commercial and Rithm Capital

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

By analyzing existing cross correlation between Ares Commercial Real and Rithm Capital Corp, you can compare the effects of market volatilities on Ares Commercial 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 Ares Commercial with a short position of Rithm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Commercial and Rithm Capital.

Diversification Opportunities for Ares Commercial and Rithm Capital

-0.1

Correlation Coefficient

Ares Commercial  Rithm Capital

Good diversification

The 3 months correlation between Ares and Rithm is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real 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 Ares Commercial 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 Ares Commercial Real 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 Ares Commercial i.e., Ares Commercial and Rithm Capital go up and down completely randomly.

Pair Corralation between Ares Commercial and Rithm Capital

Given the investment horizon of 90 days Ares Commercial Real is expected to generate 12.43 times more return on investment than Rithm Capital. However, Ares Commercial is 12.43 times more volatile than Rithm Capital Corp. It trades about 0.27 of its potential returns per unit of risk. Rithm Capital Corp is currently generating about -0.05 per unit of risk. If you would invest  630.00  in Ares Commercial Real on September 3, 2024 and sell it today you would earn a total of  92.00  from holding Ares Commercial Real or generate 14.6% return on investment over 90 days.

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

Ares Commercial Real  vs.  Rithm Capital Corp

Ares Commercial Real

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Commercial Real are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Ares Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rithm Capital Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rithm Capital Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Rithm Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ares Commercial and Rithm Capital

The main advantage of trading using opposite Ares Commercial and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Commercial 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 Ares Commercial Real 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.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.