Correlation Between Ready Capital and Western Acquisition

Can any of the company-specific risk be diversified away by investing in both Ready Capital and Western Acquisition 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 Western Acquisition 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 Western Acquisition Ventures, you can compare the effects of market volatilities on Ready Capital and Western Acquisition 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 Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Western Acquisition.

Diversification Opportunities for Ready Capital and Western Acquisition

-0.75

Correlation Coefficient

Ready Capital  Western Acquisition

Pay attention - limited upside

The 3 months correlation between Ready and Western is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Ready Capital i.e., Ready Capital and Western Acquisition go up and down completely randomly.

Pair Corralation between Ready Capital and Western Acquisition

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the Western Acquisition. In addition to that, Ready Capital is 2.51 times more volatile than Western Acquisition Ventures. It trades about -0.05 of its total potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.17 per unit of volatility. If you would invest  1,075  in Western Acquisition Ventures on August 31, 2024 and sell it today you would earn a total of  79.00  from holding Western Acquisition Ventures or generate 7.35% return on investment over 90 days.

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

Ready Capital Corp  vs.  Western Acquisition Ventures

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Western Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Ready Capital and Western Acquisition

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

The idea behind Ready Capital Corp and Western Acquisition Ventures 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.