Correlation Between Granite Point and AG Mortgage

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

Diversification Opportunities for Granite Point and AG Mortgage

-0.45

Correlation Coefficient

Granite Point  AG Mortgage

Very good diversification

The 3 months correlation between Granite and MITT is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point Mortgage and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Granite Point i.e., Granite Point and AG Mortgage go up and down completely randomly.

Pair Corralation between Granite Point and AG Mortgage

Given the investment horizon of 90 days Granite Point Mortgage is expected to generate 1.92 times more return on investment than AG Mortgage. However, Granite Point is 1.92 times more volatile than AG Mortgage Investment. It trades about 0.32 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about -0.27 per unit of risk. If you would invest  299.00  in Granite Point Mortgage on August 31, 2024 and sell it today you would earn a total of  56.00  from holding Granite Point Mortgage or generate 18.73% 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.  AG Mortgage Investment

Granite Point Mortgage

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Point Mortgage are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Granite Point unveiled solid returns over the last few months and may actually be approaching a breakup point.

AG Mortgage Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AG Mortgage Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AG Mortgage is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Granite Point and AG Mortgage

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

The idea behind Granite Point Mortgage and AG Mortgage 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.