Correlation Between Cherry Hill and Two Harbors
Can any of the company-specific risk be diversified away by investing in both Cherry Hill 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 Cherry Hill and Two Harbors 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 Two Harbors Investments, you can compare the effects of market volatilities on Cherry Hill 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 Cherry Hill with a short position of Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cherry Hill and Two Harbors.
Diversification Opportunities for Cherry Hill and Two Harbors
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cherry and Two is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage 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 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 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 Cherry Hill i.e., Cherry Hill and Two Harbors go up and down completely randomly.
Pair Corralation between Cherry Hill and Two Harbors
Given the investment horizon of 90 days Cherry Hill Mortgage is expected to under-perform the Two Harbors. In addition to that, Cherry Hill is 1.53 times more volatile than Two Harbors Investments. It trades about -0.37 of its total potential returns per unit of risk. Two Harbors Investments is currently generating about -0.21 per unit of volatility. If you would invest 1,281 in Two Harbors Investments on August 28, 2024 and sell it today you would lose (100.00) from holding Two Harbors Investments or give up 7.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cherry Hill Mortgage vs. Two Harbors Investments
Performance |
| Timeline |
| Cherry Hill Mortgage |
| Two Harbors Investments |
Cherry Hill and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cherry Hill and Two Harbors
The main advantage of trading using opposite Cherry Hill and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill 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.| Cherry Hill vs. Ellington Financial | Cherry Hill vs. Dynex Capital | Cherry Hill vs. Ares Commercial Real | Cherry Hill vs. Chimera Investment |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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