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

-0.43

Correlation Coefficient

Ares Commercial  Rithm Capital

Very good diversification

The 3 months correlation between Ares and Rithm is -0.43. 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 under-perform the Rithm Capital. In addition to that, Ares Commercial is 1.59 times more volatile than Rithm Capital Corp. It trades about -0.2 of its total potential returns per unit of risk. Rithm Capital Corp is currently generating about -0.03 per unit of volatility. If you would invest  1,082  in Rithm Capital Corp on January 5, 2025 and sell it today you would lose (37.00) from holding Rithm Capital Corp or give up 3.42% of portfolio value over 90 days.

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

Ares Commercial Real  vs.  Rithm Capital Corp

Ares Commercial Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Rithm Capital Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rithm Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rithm Capital is not utilizing all of its potentials. The latest stock price disarray, 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.