Correlation Between Invesco Mortgage and Cherry Hill

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

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

Diversification Opportunities for Invesco Mortgage and Cherry Hill

0.62

Correlation Coefficient

Invesco Mortgage  Cherry Hill

Poor diversification

The 3 months correlation between Invesco and Cherry is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Mortgage Capital and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage and Invesco Mortgage 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 Invesco Mortgage Capital are associated (or correlated) with Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Invesco Mortgage i.e., Invesco Mortgage and Cherry Hill go up and down completely randomly.

Pair Corralation between Invesco Mortgage and Cherry Hill

Considering the 90-day investment horizon Invesco Mortgage Capital is expected to generate 0.71 times more return on investment than Cherry Hill. However, Invesco Mortgage Capital is 1.4 times less risky than Cherry Hill. It trades about 0.02 of its potential returns per unit of risk. Cherry Hill Mortgage is currently generating about -0.16 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Invesco Mortgage Capital  vs.  Cherry Hill Mortgage

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.

Cherry Hill Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Invesco Mortgage and Cherry Hill

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

The idea behind Invesco Mortgage Capital and Cherry Hill Mortgage 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.