Correlation Between Ready Capital and Regional Management

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

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

Diversification Opportunities for Ready Capital and Regional Management

0.81

Correlation Coefficient

Ready Capital  Regional Management

Very poor diversification

The 3 months correlation between Ready and Regional is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management Corp and Ready Capital 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 Ready Capital Corp are associated (or correlated) with Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of Ready Capital i.e., Ready Capital and Regional Management go up and down completely randomly.

Pair Corralation between Ready Capital and Regional Management

Allowing for the 90-day total investment horizon Ready Capital is expected to generate 1.06 times less return on investment than Regional Management. But when comparing it to its historical volatility, Ready Capital Corp is 1.94 times less risky than Regional Management. It trades about 0.23 of its potential returns per unit of risk. Regional Management Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,843  in Regional Management Corp on September 1, 2024 and sell it today you would earn a total of  210.00  from holding Regional Management Corp or generate 7.39% return on investment over 90 days.

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

Ready Capital Corp  vs.  Regional Management Corp

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.

Regional Management Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ready Capital and Regional Management

The main advantage of trading using opposite Ready Capital and Regional Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready Capital position performs unexpectedly, Regional Management 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 Regional Management will offset losses from the drop in Regional Management's long position.

The idea behind Ready Capital Corp and Regional Management 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .