Correlation Between Chimera Investment and Two Harbors

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

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

Diversification Opportunities for Chimera Investment and Two Harbors

0.54

Correlation Coefficient

Chimera Investment  Two Harbors

Very weak diversification

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

Pair Corralation between Chimera Investment and Two Harbors

Assuming the 90 days trading horizon Chimera Investment is expected to generate 0.67 times more return on investment than Two Harbors. However, Chimera Investment is 1.5 times less risky than Two Harbors. It trades about 0.14 of its potential returns per unit of risk. Two Harbors Investment is currently generating about 0.03 per unit of risk. If you would invest  2,449  in Chimera Investment on August 31, 2024 and sell it today you would earn a total of  74.00  from holding Chimera Investment or generate 3.02% return on investment over 90 days.

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

Chimera Investment  vs.  Two Harbors Investment

Chimera Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chimera Investment are ranked lower than 11 (%) 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.

Two Harbors Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Two Harbors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chimera Investment and Two Harbors

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

The idea behind Chimera Investment and Two Harbors 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.