Correlation Between AGNC Investment and TPG RE

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

Diversification Opportunities for AGNC Investment and TPG RE

0.54

Correlation Coefficient

AGNC Investment  TPG RE

Very weak diversification

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

Pair Corralation between AGNC Investment and TPG RE

Assuming the 90 days horizon AGNC Investment is expected to generate 4.76 times less return on investment than TPG RE. But when comparing it to its historical volatility, AGNC Investment Corp is 6.35 times less risky than TPG RE. It trades about 0.12 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  559.00  in TPG RE Finance on September 13, 2024 and sell it today you would earn a total of  345.00  from holding TPG RE Finance or generate 61.72% 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.  TPG RE Finance

AGNC Investment Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 3 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

TPG RE Finance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TPG RE Finance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, TPG RE 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 TPG RE

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

The idea behind AGNC Investment Corp and TPG RE Finance 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.