Correlation Between Claros Mortgage and Ready Capital

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

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

Diversification Opportunities for Claros Mortgage and Ready Capital

0.82

Correlation Coefficient

Claros Mortgage  Ready Capital

Very poor diversification

The 3 months correlation between Claros and Ready is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Claros Mortgage 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 Claros Mortgage 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 Claros Mortgage 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 Claros Mortgage i.e., Claros Mortgage and Ready Capital go up and down completely randomly.

Pair Corralation between Claros Mortgage and Ready Capital

Given the investment horizon of 90 days Claros Mortgage Trust is expected to under-perform the Ready Capital. In addition to that, Claros Mortgage is 1.66 times more volatile than Ready Capital Corp. It trades about -0.03 of its total potential returns per unit of risk. Ready Capital Corp is currently generating about -0.02 per unit of volatility. If you would invest  787.00  in Ready Capital Corp on September 1, 2024 and sell it today you would lose (50.00) from holding Ready Capital Corp or give up 6.35% of portfolio value over 90 days.

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

Claros Mortgage Trust  vs.  Ready Capital Corp

Claros Mortgage Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Claros Mortgage Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Ready Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ready Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ready Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Claros Mortgage and Ready Capital

The main advantage of trading using opposite Claros Mortgage and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Claros Mortgage 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 Claros Mortgage Trust and Ready 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.