Correlation Between Sachem Capital and TPG RE

Can any of the company-specific risk be diversified away by investing in both Sachem Capital and TPG RE 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 TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on Sachem Capital and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sachem Capital and TPG RE.

Diversification Opportunities for Sachem Capital and TPG RE

0.69

Correlation Coefficient

Sachem Capital  TPG RE

Poor diversification

The 3 months correlation between Sachem and TPG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sachem Capital Corp and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of Sachem Capital i.e., Sachem Capital and TPG RE go up and down completely randomly.

Pair Corralation between Sachem Capital and TPG RE

Assuming the 90 days trading horizon Sachem Capital Corp is expected to under-perform the TPG RE. In addition to that, Sachem Capital is 2.64 times more volatile than TPG RE Finance. It trades about -0.15 of its total potential returns per unit of risk. TPG RE Finance is currently generating about -0.04 per unit of volatility. If you would invest  1,861  in TPG RE Finance on September 25, 2024 and sell it today you would lose (46.00) from holding TPG RE Finance or give up 2.47% of portfolio value over 90 days.

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

Sachem Capital Corp  vs.  TPG RE Finance

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.

TPG RE Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TPG RE Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, TPG RE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sachem Capital and TPG RE

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

The idea behind Sachem Capital Corp and TPG RE Finance 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.