Correlation Between ARMOUR Residential and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Chimera Investment 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 Chimera Investment 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 Chimera Investment, you can compare the effects of market volatilities on ARMOUR Residential and Chimera Investment 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 Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Chimera Investment.
Diversification Opportunities for ARMOUR Residential and Chimera Investment
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARMOUR and Chimera is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Chimera Investment go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Chimera Investment
Considering the 90-day investment horizon ARMOUR Residential REIT is expected to generate 0.69 times more return on investment than Chimera Investment. However, ARMOUR Residential REIT is 1.45 times less risky than Chimera Investment. It trades about 0.05 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.01 per unit of risk. If you would invest 1,582 in ARMOUR Residential REIT on August 27, 2024 and sell it today you would earn a total of 287.00 from holding ARMOUR Residential REIT or generate 18.14% 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. Chimera Investment
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Chimera Investment |
ARMOUR Residential and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Chimera Investment
The main advantage of trading using opposite ARMOUR Residential and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Chimera Investment 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 Chimera Investment will offset losses from the drop in Chimera Investment's long position.| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
| Chimera Investment vs. Two Harbors Investments | Chimera Investment vs. MFA Financial | Chimera Investment vs. Invesco Mortgage Capital | Chimera Investment vs. Orchid Island 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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