Correlation Between AGNC Investment and Lument Finance
Can any of the company-specific risk be diversified away by investing in both AGNC Investment 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 AGNC Investment and Lument Finance 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 Lument Finance Trust, you can compare the effects of market volatilities on AGNC Investment 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 AGNC Investment with a short position of Lument Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and Lument Finance.
Diversification Opportunities for AGNC Investment and Lument Finance
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AGNC and Lument is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp 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 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 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 AGNC Investment i.e., AGNC Investment and Lument Finance go up and down completely randomly.
Pair Corralation between AGNC Investment and Lument Finance
Assuming the 90 days horizon AGNC Investment is expected to generate 12.24 times less return on investment than Lument Finance. But when comparing it to its historical volatility, AGNC Investment Corp is 6.84 times less risky than Lument Finance. It trades about 0.03 of its potential returns per unit of risk. Lument Finance Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 250.00 in Lument Finance Trust on August 30, 2024 and sell it today you would earn a total of 8.00 from holding Lument Finance Trust or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AGNC Investment Corp vs. Lument Finance Trust
Performance |
| Timeline |
| AGNC Investment Corp |
| Lument Finance Trust |
AGNC Investment and Lument Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGNC Investment and Lument Finance
The main advantage of trading using opposite AGNC Investment and Lument Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment 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.| AGNC Investment vs. AG Mortgage Investment | AGNC Investment vs. AG Mortgage Investment | AGNC Investment vs. Invesco Mortgage Capital | AGNC Investment vs. Invesco Mortgage Capital |
| Lument Finance vs. AGNC Investment Corp | Lument Finance vs. Nexpoint Real Estate | Lument Finance vs. Great Ajax Corp | Lument Finance vs. Ladder Capital Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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