Correlation Between Granite Point and Invesco Mortgage

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

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

Diversification Opportunities for Granite Point and Invesco Mortgage

-0.5

Correlation Coefficient

Granite Point  Invesco Mortgage

Very good diversification

The 3 months correlation between Granite and Invesco is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point 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 Granite Point 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 Granite Point 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 Granite Point i.e., Granite Point and Invesco Mortgage go up and down completely randomly.

Pair Corralation between Granite Point and Invesco Mortgage

Assuming the 90 days trading horizon Granite Point Mortgage is expected to generate 1.4 times more return on investment than Invesco Mortgage. However, Granite Point is 1.4 times more volatile than Invesco Mortgage Capital. It trades about 0.23 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.05 per unit of risk. If you would invest  1,531  in Granite Point Mortgage on August 31, 2024 and sell it today you would earn a total of  282.00  from holding Granite Point Mortgage or generate 18.42% return on investment over 90 days.

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

Granite Point Mortgage  vs.  Invesco Mortgage Capital

Granite Point Mortgage

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Point Mortgage are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Granite Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Invesco Mortgage Capital

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Mortgage Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco Mortgage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Granite Point and Invesco Mortgage

The main advantage of trading using opposite Granite Point and Invesco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Point 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 Granite Point 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.