Correlation Between AGNC Investment and Chimera Investment

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

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

Diversification Opportunities for AGNC Investment and Chimera Investment

0.54

Correlation Coefficient

AGNC Investment  Chimera Investment

Very weak diversification

The 3 months correlation between AGNC and Chimera is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment and AGNC Investment 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 AGNC Investment Corp are associated (or correlated) with Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of AGNC Investment i.e., AGNC Investment and Chimera Investment go up and down completely randomly.

Pair Corralation between AGNC Investment and Chimera Investment

Assuming the 90 days horizon AGNC Investment is expected to generate 1.75 times less return on investment than Chimera Investment. But when comparing it to its historical volatility, AGNC Investment Corp is 2.17 times less risky than Chimera Investment. It trades about 0.15 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,265  in Chimera Investment on September 2, 2024 and sell it today you would earn a total of  134.00  from holding Chimera Investment or generate 5.92% return on investment over 90 days.

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

AGNC Investment Corp  vs.  Chimera Investment

AGNC Investment Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGNC Investment is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Chimera Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Chimera Investment is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AGNC Investment and Chimera Investment

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

The idea behind AGNC Investment Corp and Chimera Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.