Correlation Between Chimera Investment and Invesco Mortgage
Can any of the company-specific risk be diversified away by investing in both Chimera Investment and Invesco Mortgage 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 Chimera Investment and Invesco Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chimera Investment and Invesco Mortgage Capital, you can compare the effects of market volatilities on Chimera Investment and Invesco Mortgage 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 Chimera Investment with a short position of Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chimera Investment and Invesco Mortgage.
Diversification Opportunities for Chimera Investment and Invesco Mortgage
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chimera and Invesco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital and Chimera Investment 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 Chimera Investment are associated (or correlated) with Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of Chimera Investment i.e., Chimera Investment and Invesco Mortgage go up and down completely randomly.
Pair Corralation between Chimera Investment and Invesco Mortgage
Assuming the 90 days trading horizon Chimera Investment is expected to generate 0.55 times more return on investment than Invesco Mortgage. However, Chimera Investment is 1.83 times less risky than Invesco Mortgage. It trades about 0.15 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.07 per unit of risk. If you would invest 1,875 in Chimera Investment on August 27, 2024 and sell it today you would earn a total of 655.00 from holding Chimera Investment or generate 34.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chimera Investment vs. Invesco Mortgage Capital
Performance |
| Timeline |
| Chimera Investment |
| Invesco Mortgage Capital |
Chimera Investment and Invesco Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chimera Investment and Invesco Mortgage
The main advantage of trading using opposite Chimera Investment and Invesco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chimera Investment position performs unexpectedly, Invesco Mortgage 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 Invesco Mortgage will offset losses from the drop in Invesco Mortgage's long position.| Chimera Investment vs. MFA Financial | Chimera Investment vs. Two Harbors Investment | Chimera Investment vs. Invesco Mortgage Capital | Chimera Investment vs. Chimera Investment |
| Invesco Mortgage vs. New York Mortgage | Invesco Mortgage vs. New York Mortgage | Invesco Mortgage vs. Two Harbors Investment | Invesco Mortgage vs. Two Harbors 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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