Correlation Between Cherry Hill and Lument Finance
Can any of the company-specific risk be diversified away by investing in both Cherry Hill and Lument Finance 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 Cherry Hill and Lument Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cherry Hill Mortgage and Lument Finance Trust, you can compare the effects of market volatilities on Cherry Hill and Lument Finance 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 Cherry Hill with a short position of Lument Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cherry Hill and Lument Finance.
Diversification Opportunities for Cherry Hill and Lument Finance
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cherry and Lument is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust and Cherry Hill 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 Cherry Hill Mortgage are associated (or correlated) with Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Cherry Hill i.e., Cherry Hill and Lument Finance go up and down completely randomly.
Pair Corralation between Cherry Hill and Lument Finance
Assuming the 90 days trading horizon Cherry Hill is expected to generate 3.26 times less return on investment than Lument Finance. But when comparing it to its historical volatility, Cherry Hill Mortgage is 1.58 times less risky than Lument Finance. It trades about 0.03 of its potential returns per unit of risk. Lument Finance Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 151.00 in Lument Finance Trust on August 27, 2024 and sell it today you would earn a total of 106.00 from holding Lument Finance Trust or generate 70.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cherry Hill Mortgage vs. Lument Finance Trust
Performance |
| Timeline |
| Cherry Hill Mortgage |
| Lument Finance Trust |
Cherry Hill and Lument Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cherry Hill and Lument Finance
The main advantage of trading using opposite Cherry Hill and Lument Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill position performs unexpectedly, Lument Finance 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 Lument Finance will offset losses from the drop in Lument Finance's long position.| Cherry Hill vs. Chimera Investment | Cherry Hill vs. Chimera Investment | Cherry Hill vs. Chimera Investment | Cherry Hill vs. Invesco Mortgage Capital |
| Lument Finance vs. AGNC Investment Corp | Lument Finance vs. Aquagold International | Lument Finance vs. Morningstar Unconstrained Allocation | Lument Finance vs. Thrivent High Yield |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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