Correlation Between Ecc Cap and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Ecc Cap 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 Ecc Cap and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ecc Cap Corp and ARMOUR Residential REIT, you can compare the effects of market volatilities on Ecc Cap 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 Ecc Cap with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecc Cap and ARMOUR Residential.
Diversification Opportunities for Ecc Cap and ARMOUR Residential
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ecc and ARMOUR is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ecc Cap Corp 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 Ecc Cap 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 Ecc Cap Corp 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 Ecc Cap i.e., Ecc Cap and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Ecc Cap and ARMOUR Residential
Given the investment horizon of 90 days Ecc Cap Corp is expected to under-perform the ARMOUR Residential. In addition to that, Ecc Cap is 5.21 times more volatile than ARMOUR Residential REIT. It trades about -0.15 of its total potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.06 per unit of volatility. If you would invest 1,704 in ARMOUR Residential REIT on August 28, 2024 and sell it today you would earn a total of 551.00 from holding ARMOUR Residential REIT or generate 32.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 8.89% |
| Values | Daily Returns |
Ecc Cap Corp vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Ecc Cap Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ARMOUR Residential REIT |
Ecc Cap and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ecc Cap and ARMOUR Residential
The main advantage of trading using opposite Ecc Cap and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecc Cap 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.| Ecc Cap vs. Ready Capital Corp | Ecc Cap vs. Ellington Residential Mortgage | Ecc Cap vs. Ellington Financial | Ecc Cap vs. Dynex Capital |
| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Chimera 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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