Correlation Between ARMOUR Residential and Ares Commercial
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Ares Commercial 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 Ares Commercial 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 Ares Commercial Real, you can compare the effects of market volatilities on ARMOUR Residential and Ares Commercial 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 Ares Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Ares Commercial.
Diversification Opportunities for ARMOUR Residential and Ares Commercial
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ARMOUR and Ares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Ares Commercial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Commercial Real 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 Ares Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Commercial Real has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Ares Commercial go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Ares Commercial
Considering the 90-day investment horizon ARMOUR Residential REIT is expected to under-perform the Ares Commercial. But the stock apears to be less risky and, when comparing its historical volatility, ARMOUR Residential REIT is 2.66 times less risky than Ares Commercial. The stock trades about -0.01 of its potential returns per unit of risk. The Ares Commercial Real is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 646.00 in Ares Commercial Real on August 27, 2024 and sell it today you would earn a total of 83.00 from holding Ares Commercial Real or generate 12.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Ares Commercial Real
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Ares Commercial Real |
ARMOUR Residential and Ares Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Ares Commercial
The main advantage of trading using opposite ARMOUR Residential and Ares Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Ares Commercial 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 Ares Commercial will offset losses from the drop in Ares Commercial's long position.| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
| Ares Commercial vs. Two Harbors Investments | Ares Commercial vs. Apollo Commercial Real | Ares Commercial vs. Ellington Financial | Ares Commercial vs. Dynex 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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