Correlation Between Compass Diversified and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Compass Diversified 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 Compass Diversified and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Diversified and ARMOUR Residential REIT, you can compare the effects of market volatilities on Compass Diversified 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 Compass Diversified with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Diversified and ARMOUR Residential.
Diversification Opportunities for Compass Diversified and ARMOUR Residential
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Compass and ARMOUR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Compass Diversified 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 Compass Diversified 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 Compass Diversified 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 Compass Diversified i.e., Compass Diversified and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Compass Diversified and ARMOUR Residential
Assuming the 90 days trading horizon Compass Diversified is expected to generate 1.42 times more return on investment than ARMOUR Residential. However, Compass Diversified is 1.42 times more volatile than ARMOUR Residential REIT. It trades about 0.39 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.28 per unit of risk. If you would invest 2,207 in Compass Diversified on October 20, 2024 and sell it today you would earn a total of 216.00 from holding Compass Diversified or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Diversified vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Compass Diversified |
| ARMOUR Residential REIT |
Compass Diversified and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Diversified and ARMOUR Residential
The main advantage of trading using opposite Compass Diversified and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Diversified 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.| Compass Diversified vs. Compass Diversified | Compass Diversified vs. Chimera Investment | Compass Diversified vs. ARMOUR Residential REIT | Compass Diversified vs. Global Ship Lease |
| ARMOUR Residential vs. Cherry Hill Mortgage | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. Chimera Investment | ARMOUR Residential 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 CEOs Directory module to screen CEOs from public companies around the world.
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