Correlation Between ARMOUR Residential and City Office
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and City Office 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 ARMOUR Residential and City Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARMOUR Residential REIT and City Office REIT, you can compare the effects of market volatilities on ARMOUR Residential and City Office 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 ARMOUR Residential with a short position of City Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and City Office.
Diversification Opportunities for ARMOUR Residential and City Office
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ARMOUR and City is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and City Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Office REIT and ARMOUR Residential 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 ARMOUR Residential REIT are associated (or correlated) with City Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Office REIT has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and City Office go up and down completely randomly.
Pair Corralation between ARMOUR Residential and City Office
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to under-perform the City Office. But the preferred stock apears to be less risky and, when comparing its historical volatility, ARMOUR Residential REIT is 1.72 times less risky than City Office. The preferred stock trades about -0.16 of its potential returns per unit of risk. The City Office REIT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,839 in City Office REIT on August 24, 2024 and sell it today you would earn a total of 35.00 from holding City Office REIT or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. City Office REIT
Performance |
| Timeline |
| ARMOUR Residential REIT |
| City Office REIT |
ARMOUR Residential and City Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and City Office
The main advantage of trading using opposite ARMOUR Residential and City Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, City Office 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 City Office will offset losses from the drop in City Office's long position.| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. New York Mortgage |
| City Office vs. Vornado Realty Trust | City Office vs. Vornado Realty Trust | City Office vs. SL Green Realty | City Office vs. Hudson Pacific Properties |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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