Correlation Between Rithm Capital and Cherry Hill

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

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

Diversification Opportunities for Rithm Capital and Cherry Hill

-0.6

Correlation Coefficient

Rithm Capital  Cherry Hill

Excellent diversification

The 3 months correlation between Rithm and Cherry is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rithm Capital Corp and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage and Rithm 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 Rithm Capital Corp are associated (or correlated) with Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Rithm Capital i.e., Rithm Capital and Cherry Hill go up and down completely randomly.

Pair Corralation between Rithm Capital and Cherry Hill

Assuming the 90 days trading horizon Rithm Capital Corp is expected to generate 0.07 times more return on investment than Cherry Hill. However, Rithm Capital Corp is 13.35 times less risky than Cherry Hill. It trades about -0.04 of its potential returns per unit of risk. Cherry Hill Mortgage is currently generating about -0.31 per unit of risk. If you would invest  2,528  in Rithm Capital Corp on September 1, 2024 and sell it today you would lose (5.00) from holding Rithm Capital Corp or give up 0.2% of portfolio value over 90 days.

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

Rithm Capital Corp  vs.  Cherry Hill Mortgage

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.

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 unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Rithm Capital and Cherry Hill

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

The idea behind Rithm Capital Corp and Cherry Hill Mortgage 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.