Correlation Between ARMOUR Residential and New York
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and New York 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 New York 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 New York Mortgage, you can compare the effects of market volatilities on ARMOUR Residential and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and New York.
Diversification Opportunities for ARMOUR Residential and New York
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARMOUR and New is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and New York go up and down completely randomly.
Pair Corralation between ARMOUR Residential and New York
Assuming the 90 days trading horizon ARMOUR Residential is expected to generate 1.48 times less return on investment than New York. But when comparing it to its historical volatility, ARMOUR Residential REIT is 1.08 times less risky than New York. It trades about 0.06 of its potential returns per unit of risk. New York Mortgage is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,506 in New York Mortgage on August 30, 2024 and sell it today you would earn a total of 776.00 from holding New York Mortgage or generate 51.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. New York Mortgage
Performance |
| Timeline |
| ARMOUR Residential REIT |
| New York Mortgage |
ARMOUR Residential and New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and New York
The main advantage of trading using opposite ARMOUR Residential and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.| ARMOUR Residential vs. Cherry Hill Mortgage | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. Chimera Investment | ARMOUR Residential vs. Two Harbors Investment |
| New York vs. AG Mortgage Investment | New York vs. AG Mortgage Investment | New York vs. Invesco Mortgage Capital | New York vs. Invesco Mortgage Capital |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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