Correlation Between ARMOUR Residential and Compass Diversified
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Compass Diversified 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 Compass Diversified 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 Compass Diversified, you can compare the effects of market volatilities on ARMOUR Residential and Compass Diversified 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 Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Compass Diversified.
Diversification Opportunities for ARMOUR Residential and Compass Diversified
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between ARMOUR and Compass is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Compass Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified 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 Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Compass Diversified go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Compass Diversified
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to generate 2.07 times more return on investment than Compass Diversified. However, ARMOUR Residential is 2.07 times more volatile than Compass Diversified. It trades about -0.14 of its potential returns per unit of risk. Compass Diversified is currently generating about -0.38 per unit of risk. If you would invest 2,312 in ARMOUR Residential REIT on August 28, 2024 and sell it today you would lose (57.00) from holding ARMOUR Residential REIT or give up 2.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Compass Diversified
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Compass Diversified |
ARMOUR Residential and Compass Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Compass Diversified
The main advantage of trading using opposite ARMOUR Residential and Compass Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Compass Diversified 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 Compass Diversified will offset losses from the drop in Compass Diversified's long position.| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Chimera Investment |
| Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Steel Partners Holdings | Compass Diversified vs. Tejon Ranch Co | Compass Diversified vs. Brookfield Business Partners |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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