Correlation Between ARMOUR Residential and Medalist Diversified
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Medalist 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 Medalist 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 Medalist Diversified Reit, you can compare the effects of market volatilities on ARMOUR Residential and Medalist 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 Medalist Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Medalist Diversified.
Diversification Opportunities for ARMOUR Residential and Medalist Diversified
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ARMOUR and Medalist is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Medalist Diversified Reit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medalist Diversified 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 Medalist Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medalist Diversified Reit has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Medalist Diversified go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Medalist Diversified
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to under-perform the Medalist Diversified. But the preferred stock apears to be less risky and, when comparing its historical volatility, ARMOUR Residential REIT is 3.81 times less risky than Medalist Diversified. The preferred stock trades about -0.14 of its potential returns per unit of risk. The Medalist Diversified Reit is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,425 in Medalist Diversified Reit on August 28, 2024 and sell it today you would earn a total of 132.00 from holding Medalist Diversified Reit or generate 5.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Medalist Diversified Reit
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Medalist Diversified Reit |
ARMOUR Residential and Medalist Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Medalist Diversified
The main advantage of trading using opposite ARMOUR Residential and Medalist Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Medalist 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 Medalist Diversified will offset losses from the drop in Medalist 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 |
| Medalist Diversified vs. Medallion Bank PR | Medalist Diversified vs. Sotherly Hotels PR | Medalist Diversified vs. Healthcare Trust PR | Medalist Diversified vs. Sotherly Hotels Series |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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