Correlation Between ARMOUR Residential and TPG RE
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and TPG RE 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 TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on ARMOUR Residential and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and TPG RE.
Diversification Opportunities for ARMOUR Residential and TPG RE
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ARMOUR and TPG is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and TPG RE go up and down completely randomly.
Pair Corralation between ARMOUR Residential and TPG RE
Assuming the 90 days trading horizon ARMOUR Residential REIT is expected to under-perform the TPG RE. But the preferred stock apears to be less risky and, when comparing its historical volatility, ARMOUR Residential REIT is 1.09 times less risky than TPG RE. The preferred stock trades about -0.15 of its potential returns per unit of risk. The TPG RE Finance is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,948 in TPG RE Finance on August 30, 2024 and sell it today you would lose (24.00) from holding TPG RE Finance or give up 1.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. TPG RE Finance
Performance |
| Timeline |
| ARMOUR Residential REIT |
| TPG RE Finance |
ARMOUR Residential and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and TPG RE
The main advantage of trading using opposite ARMOUR Residential and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE'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 |
| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Dynex Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. AG Mortgage Investment |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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