Correlation Between Angel Oak and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Angel Oak 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 Angel Oak and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Angel Oak Mortgage and ARMOUR Residential REIT, you can compare the effects of market volatilities on Angel Oak 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 Angel Oak with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Angel Oak and ARMOUR Residential.
Diversification Opportunities for Angel Oak and ARMOUR Residential
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Angel and ARMOUR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Angel Oak Mortgage 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 Angel Oak 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 Angel Oak Mortgage 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 Angel Oak i.e., Angel Oak and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Angel Oak and ARMOUR Residential
Given the investment horizon of 90 days Angel Oak Mortgage is expected to generate 1.69 times more return on investment than ARMOUR Residential. However, Angel Oak is 1.69 times more volatile than ARMOUR Residential REIT. It trades about 0.06 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about -0.14 per unit of risk. If you would invest 920.00 in Angel Oak Mortgage on August 24, 2024 and sell it today you would earn a total of 20.00 from holding Angel Oak Mortgage or generate 2.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Angel Oak Mortgage vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Angel Oak Mortgage |
| ARMOUR Residential REIT |
Angel Oak and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Angel Oak and ARMOUR Residential
The main advantage of trading using opposite Angel Oak and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Angel Oak 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.| Angel Oak vs. Granite Point Mortgage | Angel Oak vs. MFA Financial | Angel Oak vs. Two Harbors Investments | Angel Oak vs. PennyMac Mortgage Investment |
| ARMOUR Residential vs. Ellington Financial | ARMOUR Residential vs. Two Harbors Investments | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Ellington Residential Mortgage |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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