Correlation Between Ready Capital and DUET Acquisition

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

Diversification Opportunities for Ready Capital and DUET Acquisition

-0.53

Correlation Coefficient

Ready Capital  DUET Acquisition

Excellent diversification

The 3 months correlation between Ready and DUET is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital Corp and DUET Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUET Acquisition 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 DUET Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUET Acquisition Corp has no effect on the direction of Ready Capital i.e., Ready Capital and DUET Acquisition go up and down completely randomly.

Pair Corralation between Ready Capital and DUET Acquisition

Allowing for the 90-day total investment horizon Ready Capital Corp is expected to under-perform the DUET Acquisition. In addition to that, Ready Capital is 10.59 times more volatile than DUET Acquisition Corp. It trades about -0.02 of its total potential returns per unit of risk. DUET Acquisition Corp is currently generating about 0.21 per unit of volatility. If you would invest  1,126  in DUET Acquisition Corp on August 15, 2024 and sell it today you would earn a total of  9.00  from holding DUET Acquisition Corp or generate 0.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Ready Capital Corp  vs.  DUET Acquisition 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 latest unsteady 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.

DUET Acquisition Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DUET Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, DUET Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ready Capital and DUET Acquisition

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

The idea behind Ready Capital Corp and DUET Acquisition 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.