Correlation Between Lument Finance and ACRES Commercial

Can any of the company-specific risk be diversified away by investing in both Lument Finance and ACRES Commercial 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 Lument Finance and ACRES Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lument Finance Trust and ACRES Commercial Realty, you can compare the effects of market volatilities on Lument Finance and ACRES Commercial 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 Lument Finance with a short position of ACRES Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and ACRES Commercial.

Diversification Opportunities for Lument Finance and ACRES Commercial

0.84

Correlation Coefficient

Lument Finance  ACRES Commercial

Very poor diversification

The 3 months correlation between Lument and ACRES is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and ACRES Commercial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACRES Commercial Realty and Lument Finance 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 Lument Finance Trust are associated (or correlated) with ACRES Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACRES Commercial Realty has no effect on the direction of Lument Finance i.e., Lument Finance and ACRES Commercial go up and down completely randomly.

Pair Corralation between Lument Finance and ACRES Commercial

Assuming the 90 days trading horizon Lument Finance Trust is expected to generate 5.28 times more return on investment than ACRES Commercial. However, Lument Finance is 5.28 times more volatile than ACRES Commercial Realty. It trades about 0.13 of its potential returns per unit of risk. ACRES Commercial Realty is currently generating about 0.24 per unit of risk. If you would invest  2,083  in Lument Finance Trust on September 3, 2024 and sell it today you would earn a total of  215.00  from holding Lument Finance Trust or generate 10.32% return on investment over 90 days.

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

Lument Finance Trust  vs.  ACRES Commercial Realty

Lument Finance Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Lument Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ACRES Commercial Realty

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ACRES Commercial Realty are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ACRES Commercial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lument Finance and ACRES Commercial

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

The idea behind Lument Finance Trust and ACRES Commercial Realty 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.