Correlation Between Ready Capital and Douglas Emmett

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

Diversification Opportunities for Ready Capital and Douglas Emmett

0.77

Correlation Coefficient

Ready Capital  Douglas Emmett

Poor diversification

The 3 months correlation between Ready and Douglas is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of Ready Capital i.e., Ready Capital and Douglas Emmett go up and down completely randomly.

Pair Corralation between Ready Capital and Douglas Emmett

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to generate 1.46 times more return on investment than Douglas Emmett. However, Ready Capital is 1.46 times more volatile than Douglas Emmett. It trades about 0.07 of its potential returns per unit of risk. Douglas Emmett is currently generating about -0.01 per unit of risk. If you would invest  426.00  in Ready Capital Corp on March 12, 2025 and sell it today you would earn a total of  14.00  from holding Ready Capital Corp or generate 3.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Ready Capital Corp  vs.  Douglas Emmett

Ready Capital Corp

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Douglas Emmett is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Ready Capital and Douglas Emmett

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

The idea behind Ready Capital Corp and Douglas Emmett 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.