Correlation Between ARMOUR Residential and Global Net
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Global Net 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 Global Net 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 Global Net Lease, you can compare the effects of market volatilities on ARMOUR Residential and Global Net 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 Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Global Net.
Diversification Opportunities for ARMOUR Residential and Global Net
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ARMOUR and Global is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Global Net go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Global Net
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to under-perform the Global Net. But the preferred stock apears to be less risky and, when comparing its historical volatility, ARMOUR Residential REIT is 1.44 times less risky than Global Net. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Global Net Lease is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,305 in Global Net Lease on August 24, 2024 and sell it today you would lose (14.00) from holding Global Net Lease or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Global Net Lease
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Global Net Lease |
ARMOUR Residential and Global Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Global Net
The main advantage of trading using opposite ARMOUR Residential and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Global Net 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 Global Net will offset losses from the drop in Global Net'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 |
| Global Net vs. Modiv Inc | Global Net vs. Precinct Properties New | Global Net vs. Global Net Lease | Global Net vs. NexPoint Diversified Real |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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