Correlation Between Sachem Capital and Lument Finance

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

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

Diversification Opportunities for Sachem Capital and Lument Finance

-0.24

Correlation Coefficient

Sachem Capital  Lument Finance

Very good diversification

The 3 months correlation between Sachem and Lument is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sachem Capital Corp and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust and Sachem Capital 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 Sachem Capital Corp are associated (or correlated) with Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Sachem Capital i.e., Sachem Capital and Lument Finance go up and down completely randomly.

Pair Corralation between Sachem Capital and Lument Finance

Assuming the 90 days trading horizon Sachem Capital Corp is expected to under-perform the Lument Finance. In addition to that, Sachem Capital is 3.78 times more volatile than Lument Finance Trust. It trades about -0.13 of its total potential returns per unit of risk. Lument Finance Trust is currently generating about 0.03 per unit of volatility. If you would invest  2,319  in Lument Finance Trust on September 25, 2024 and sell it today you would earn a total of  11.00  from holding Lument Finance Trust or generate 0.47% return on investment over 90 days.

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

Sachem Capital Corp  vs.  Lument Finance Trust

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lument Finance Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lument Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sachem Capital and Lument Finance

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

The idea behind Sachem Capital Corp and Lument Finance Trust 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.