Correlation Between ARMOUR Residential and Sachem Capital
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Sachem Capital 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 Sachem Capital 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 Sachem Capital Corp, you can compare the effects of market volatilities on ARMOUR Residential and Sachem Capital 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Sachem Capital.
Diversification Opportunities for ARMOUR Residential and Sachem Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ARMOUR and Sachem is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Sachem Capital go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Sachem Capital
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to generate 0.57 times more return on investment than Sachem Capital. However, ARMOUR Residential REIT is 1.75 times less risky than Sachem Capital. It trades about 0.04 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.0 per unit of risk. If you would invest 1,811 in ARMOUR Residential REIT on November 5, 2024 and sell it today you would earn a total of 313.00 from holding ARMOUR Residential REIT or generate 17.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Sachem Capital Corp
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Sachem Capital Corp |
ARMOUR Residential and Sachem Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Sachem Capital
The main advantage of trading using opposite ARMOUR Residential and Sachem Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Sachem Capital 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 Sachem Capital will offset losses from the drop in Sachem Capital'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 |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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