Correlation Between ARMOUR Residential and Two Harbors
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential and Two Harbors 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 Two Harbors 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 Two Harbors Investments, you can compare the effects of market volatilities on ARMOUR Residential and Two Harbors 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 Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Two Harbors.
Diversification Opportunities for ARMOUR Residential and Two Harbors
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ARMOUR and Two is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Two Harbors Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investments 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investments has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Two Harbors go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Two Harbors
Considering the 90-day investment horizon ARMOUR Residential is expected to generate 10.5 times less return on investment than Two Harbors. But when comparing it to its historical volatility, ARMOUR Residential REIT is 1.02 times less risky than Two Harbors. It trades about 0.0 of its potential returns per unit of risk. Two Harbors Investments is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,207 in Two Harbors Investments on August 27, 2024 and sell it today you would lose (33.00) from holding Two Harbors Investments or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Two Harbors Investments
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Two Harbors Investments |
ARMOUR Residential and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Two Harbors
The main advantage of trading using opposite ARMOUR Residential and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' long position.| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
| Two Harbors vs. New York Mortgage | Two Harbors vs. ARMOUR Residential REIT | Two Harbors vs. Annaly Capital Management | Two Harbors vs. AGNC Investment Corp |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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