Correlation Between ARMOUR Residential and Modiv
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Modiv 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 Modiv 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 Modiv Inc, you can compare the effects of market volatilities on ARMOUR Residential and Modiv 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 Modiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Modiv.
Diversification Opportunities for ARMOUR Residential and Modiv
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ARMOUR and Modiv is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Modiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modiv Inc 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 Modiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modiv Inc has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Modiv go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Modiv
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to generate 0.75 times more return on investment than Modiv. However, ARMOUR Residential REIT is 1.33 times less risky than Modiv. It trades about 0.08 of its potential returns per unit of risk. Modiv Inc is currently generating about 0.06 per unit of risk. If you would invest 1,772 in ARMOUR Residential REIT on August 27, 2024 and sell it today you would earn a total of 483.00 from holding ARMOUR Residential REIT or generate 27.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Modiv Inc
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Modiv Inc |
ARMOUR Residential and Modiv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Modiv
The main advantage of trading using opposite ARMOUR Residential and Modiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Modiv 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 Modiv will offset losses from the drop in Modiv's long position.| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Invesco Mortgage Capital |
| Modiv vs. SiriusPoint | Modiv vs. RLJ Lodging Trust | Modiv vs. ARMOUR Residential REIT | Modiv vs. Sachem Capital Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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