Correlation Between ARMOUR Residential and Rithm Capital
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Rithm 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 Rithm 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 Rithm Capital Corp, you can compare the effects of market volatilities on ARMOUR Residential and Rithm 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 Rithm Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Rithm Capital.
Diversification Opportunities for ARMOUR Residential and Rithm Capital
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARMOUR and Rithm is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Rithm Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rithm 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 Rithm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rithm Capital Corp has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Rithm Capital go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Rithm Capital
Considering the 90-day investment horizon ARMOUR Residential REIT is expected to under-perform the Rithm Capital. But the stock apears to be less risky and, when comparing its historical volatility, ARMOUR Residential REIT is 1.03 times less risky than Rithm Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Rithm Capital Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,047 in Rithm Capital Corp on August 27, 2024 and sell it today you would earn a total of 68.00 from holding Rithm Capital Corp or generate 6.49% 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. Rithm Capital Corp
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Rithm Capital Corp |
ARMOUR Residential and Rithm Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Rithm Capital
The main advantage of trading using opposite ARMOUR Residential and Rithm Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Rithm 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 Rithm Capital will offset losses from the drop in Rithm Capital's long position.| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
| Rithm Capital vs. Starwood Property Trust | Rithm Capital vs. AGNC Investment Corp | Rithm Capital vs. Blackstone Mortgage Trust | Rithm Capital vs. Ares Commercial Real |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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