Correlation Between Angel Oak and Invesco Mortgage

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

By analyzing existing cross correlation between Angel Oak Mortgage and Invesco Mortgage Capital, you can compare the effects of market volatilities on Angel Oak and Invesco Mortgage 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 Angel Oak with a short position of Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and Invesco Mortgage.

Diversification Opportunities for Angel Oak and Invesco Mortgage

0.31

Correlation Coefficient

Angel Oak  Invesco Mortgage

Weak diversification

The 3 months correlation between Angel and Invesco is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Mortgage and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital and Angel Oak 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 Angel Oak Mortgage are associated (or correlated) with Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of Angel Oak i.e., Angel Oak and Invesco Mortgage go up and down completely randomly.

Pair Corralation between Angel Oak and Invesco Mortgage

Given the investment horizon of 90 days Angel Oak Mortgage is expected to under-perform the Invesco Mortgage. In addition to that, Angel Oak is 1.07 times more volatile than Invesco Mortgage Capital. It trades about -0.1 of its total potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.02 per unit of volatility. If you would invest  822.00  in Invesco Mortgage Capital on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Invesco Mortgage Capital or generate 1.58% return on investment over 90 days.

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

Angel Oak Mortgage  vs.  Invesco Mortgage Capital

Angel Oak Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Angel Oak Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Invesco Mortgage Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Mortgage Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Mortgage is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Angel Oak and Invesco Mortgage

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

The idea behind Angel Oak Mortgage and Invesco Mortgage Capital 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 Stocks Directory module to find actively traded stocks across global markets.