Correlation Between Chimera Investment and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Chimera Investment and ARMOUR Residential 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 ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chimera Investment and ARMOUR Residential REIT, you can compare the effects of market volatilities on Chimera Investment and ARMOUR Residential 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 ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chimera Investment and ARMOUR Residential.
Diversification Opportunities for Chimera Investment and ARMOUR Residential
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chimera and ARMOUR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Chimera Investment and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT 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 ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Chimera Investment i.e., Chimera Investment and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Chimera Investment and ARMOUR Residential
Considering the 90-day investment horizon Chimera Investment is expected to generate 2.95 times less return on investment than ARMOUR Residential. In addition to that, Chimera Investment is 1.45 times more volatile than ARMOUR Residential REIT. It trades about 0.01 of its total potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.05 per unit of volatility. If you would invest 1,582 in ARMOUR Residential REIT on August 27, 2024 and sell it today you would earn a total of 287.00 from holding ARMOUR Residential REIT or generate 18.14% 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. ARMOUR Residential REIT
Performance |
| Timeline |
| Chimera Investment |
| ARMOUR Residential REIT |
Chimera Investment and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chimera Investment and ARMOUR Residential
The main advantage of trading using opposite Chimera Investment and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chimera Investment position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Chimera Investment vs. Two Harbors Investments | Chimera Investment vs. MFA Financial | Chimera Investment vs. Invesco Mortgage Capital | Chimera Investment vs. Orchid Island Capital |
| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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