Correlation Between ARMOUR Residential and Annaly Capital
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Annaly 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 Annaly 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 Annaly Capital Management, you can compare the effects of market volatilities on ARMOUR Residential and Annaly 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 Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Annaly Capital.
Diversification Opportunities for ARMOUR Residential and Annaly Capital
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARMOUR and Annaly is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Annaly Capital go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Annaly Capital
Considering the 90-day investment horizon ARMOUR Residential is expected to generate 1.45 times less return on investment than Annaly Capital. In addition to that, ARMOUR Residential is 1.12 times more volatile than Annaly Capital Management. It trades about 0.04 of its total potential returns per unit of risk. Annaly Capital Management is currently generating about 0.07 per unit of volatility. If you would invest 1,811 in Annaly Capital Management on August 24, 2024 and sell it today you would earn a total of 167.00 from holding Annaly Capital Management or generate 9.22% 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. Annaly Capital Management
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Annaly Capital Management |
ARMOUR Residential and Annaly Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Annaly Capital
The main advantage of trading using opposite ARMOUR Residential and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Annaly 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.| ARMOUR Residential vs. Ellington Financial | ARMOUR Residential vs. Two Harbors Investments | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Ellington Residential Mortgage |
| Annaly Capital vs. ARMOUR Residential REIT | Annaly Capital vs. Two Harbors Investments | Annaly Capital vs. Arbor Realty Trust | Annaly Capital vs. Chimera 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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