Correlation Between ACRES Commercial and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both ACRES Commercial 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 ACRES Commercial and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACRES Commercial Realty and ARMOUR Residential REIT, you can compare the effects of market volatilities on ACRES Commercial 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 ACRES Commercial with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACRES Commercial and ARMOUR Residential.
Diversification Opportunities for ACRES Commercial and ARMOUR Residential
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ACRES and ARMOUR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ACRES Commercial Realty 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 ACRES Commercial 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 ACRES Commercial Realty 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 ACRES Commercial i.e., ACRES Commercial and ARMOUR Residential go up and down completely randomly.
Pair Corralation between ACRES Commercial and ARMOUR Residential
Assuming the 90 days trading horizon ACRES Commercial Realty is expected to generate 0.81 times more return on investment than ARMOUR Residential. However, ACRES Commercial Realty is 1.24 times less risky than ARMOUR Residential. It trades about -0.01 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about -0.01 per unit of risk. If you would invest 2,282 in ACRES Commercial Realty on August 28, 2024 and sell it today you would lose (4.00) from holding ACRES Commercial Realty or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ACRES Commercial Realty vs. ARMOUR Residential REIT
Performance |
| Timeline |
| ACRES Commercial Realty |
| ARMOUR Residential REIT |
ACRES Commercial and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ACRES Commercial and ARMOUR Residential
The main advantage of trading using opposite ACRES Commercial and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACRES Commercial 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.The idea behind ACRES Commercial Realty and ARMOUR Residential REIT 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.| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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