Correlation Between AG Mortgage and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both AG Mortgage and ARMOUR Residential 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 AG Mortgage and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AG Mortgage Investment and ARMOUR Residential REIT, you can compare the effects of market volatilities on AG Mortgage and ARMOUR Residential 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 AG Mortgage with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of AG Mortgage and ARMOUR Residential.
Diversification Opportunities for AG Mortgage and ARMOUR Residential
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MITT-PB and ARMOUR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and AG 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 AG Mortgage Investment are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of AG Mortgage i.e., AG Mortgage and ARMOUR Residential go up and down completely randomly.
Pair Corralation between AG Mortgage and ARMOUR Residential
Assuming the 90 days trading horizon AG Mortgage Investment is expected to generate 1.33 times more return on investment than ARMOUR Residential. However, AG Mortgage is 1.33 times more volatile than ARMOUR Residential REIT. It trades about 0.14 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.03 per unit of risk. If you would invest 2,028 in AG Mortgage Investment on September 9, 2024 and sell it today you would earn a total of 170.00 from holding AG Mortgage Investment or generate 8.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
AG Mortgage Investment vs. ARMOUR Residential REIT
Performance |
Timeline |
AG Mortgage Investment |
ARMOUR Residential REIT |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
AG Mortgage and ARMOUR Residential Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AG Mortgage and ARMOUR Residential
The main advantage of trading using opposite AG Mortgage and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.AG Mortgage vs. Cherry Hill Mortgage | AG Mortgage vs. Chimera Investment | AG Mortgage vs. PennyMac Mortgage Investment | AG Mortgage vs. Lument Finance Trust |
ARMOUR Residential vs. Cherry Hill Mortgage | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. Chimera Investment | ARMOUR Residential vs. Two Harbors Investment |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |