Correlation Between AGNC Investment and Starwood Property
Can any of the company-specific risk be diversified away by investing in both AGNC Investment and Starwood Property 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 AGNC Investment and Starwood Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGNC Investment Corp and Starwood Property Trust, you can compare the effects of market volatilities on AGNC Investment and Starwood Property 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 AGNC Investment with a short position of Starwood Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and Starwood Property.
Diversification Opportunities for AGNC Investment and Starwood Property
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AGNC and Starwood is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and Starwood Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starwood Property Trust and AGNC Investment 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 AGNC Investment Corp are associated (or correlated) with Starwood Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starwood Property Trust has no effect on the direction of AGNC Investment i.e., AGNC Investment and Starwood Property go up and down completely randomly.
Pair Corralation between AGNC Investment and Starwood Property
Given the investment horizon of 90 days AGNC Investment is expected to generate 1.24 times less return on investment than Starwood Property. But when comparing it to its historical volatility, AGNC Investment Corp is 1.03 times less risky than Starwood Property. It trades about 0.06 of its potential returns per unit of risk. Starwood Property Trust is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,794 in Starwood Property Trust on August 24, 2024 and sell it today you would earn a total of 197.00 from holding Starwood Property Trust or generate 10.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
AGNC Investment Corp vs. Starwood Property Trust
Performance |
| Timeline |
| AGNC Investment Corp |
| Starwood Property Trust |
AGNC Investment and Starwood Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGNC Investment and Starwood Property
The main advantage of trading using opposite AGNC Investment and Starwood Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment position performs unexpectedly, Starwood Property 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 Starwood Property will offset losses from the drop in Starwood Property's long position.| AGNC Investment vs. Two Harbors Investments | AGNC Investment vs. Chimera Investment | AGNC Investment vs. ARMOUR Residential REIT | AGNC Investment vs. Arbor Realty Trust |
| Starwood Property vs. Blackstone Mortgage Trust | Starwood Property vs. Arbor Realty Trust | Starwood Property vs. Apollo Commercial Real | Starwood Property vs. Omega Healthcare Investors |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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