Correlation Between Two Harbors and Angel Oak

Can any of the company-specific risk be diversified away by investing in both Two Harbors and Angel Oak 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 Two Harbors and Angel Oak into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Two Harbors Investments and Angel Oak Mortgage, you can compare the effects of market volatilities on Two Harbors and Angel Oak 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 Two Harbors with a short position of Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and Angel Oak.

Diversification Opportunities for Two Harbors and Angel Oak

0.72

Correlation Coefficient

Two Harbors  Angel Oak

Poor diversification

The 3 months correlation between Two and Angel is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investments and Angel Oak Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Mortgage and Two Harbors 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 Two Harbors Investments are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Mortgage has no effect on the direction of Two Harbors i.e., Two Harbors and Angel Oak go up and down completely randomly.

Pair Corralation between Two Harbors and Angel Oak

Considering the 90-day investment horizon Two Harbors Investments is expected to under-perform the Angel Oak. But the stock apears to be less risky and, when comparing its historical volatility, Two Harbors Investments is 1.1 times less risky than Angel Oak. The stock trades about -0.17 of its potential returns per unit of risk. The Angel Oak Mortgage is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,082  in Angel Oak Mortgage on August 31, 2024 and sell it today you would lose (101.00) from holding Angel Oak Mortgage or give up 9.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Two Harbors Investments  vs.  Angel Oak Mortgage

Two Harbors Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Two Harbors Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Angel Oak Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Angel Oak Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Two Harbors and Angel Oak

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

The idea behind Two Harbors Investments and Angel Oak 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.