Correlation Between Ares Commercial and Lument Finance
Can any of the company-specific risk be diversified away by investing in both Ares Commercial 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 Ares Commercial and Lument Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ares Commercial Real and Lument Finance Trust, you can compare the effects of market volatilities on Ares Commercial 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 Ares Commercial with a short position of Lument Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ares Commercial and Lument Finance.
Diversification Opportunities for Ares Commercial and Lument Finance
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ares and Lument is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ares Commercial Real 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 Ares 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 Ares Commercial Real 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 Ares Commercial i.e., Ares Commercial and Lument Finance go up and down completely randomly.
Pair Corralation between Ares Commercial and Lument Finance
Given the investment horizon of 90 days Ares Commercial Real is expected to generate 0.99 times more return on investment than Lument Finance. However, Ares Commercial Real is 1.01 times less risky than Lument Finance. It trades about 0.07 of its potential returns per unit of risk. Lument Finance Trust is currently generating about 0.04 per unit of risk. If you would invest 607.00 in Ares Commercial Real on August 24, 2024 and sell it today you would earn a total of 109.00 from holding Ares Commercial Real or generate 17.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Ares Commercial Real vs. Lument Finance Trust
Performance |
| Timeline |
| Ares Commercial Real |
| Lument Finance Trust |
Ares Commercial and Lument Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ares Commercial and Lument Finance
The main advantage of trading using opposite Ares Commercial and Lument Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Commercial 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.| Ares Commercial vs. Two Harbors Investments | Ares Commercial vs. Apollo Commercial Real | Ares Commercial vs. Ellington Financial | Ares Commercial vs. Dynex Capital |
| Lument Finance vs. Acres Commercial Realty | Lument Finance vs. AG Mortgage Investment | Lument Finance vs. Rithm Capital Corp | Lument Finance vs. Ares Commercial Real |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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