Correlation Between Global Net and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Global Net 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 Global Net and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Net Lease and ARMOUR Residential REIT, you can compare the effects of market volatilities on Global Net 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 Global Net with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Net and ARMOUR Residential.
Diversification Opportunities for Global Net and ARMOUR Residential
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and ARMOUR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease 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 Global Net 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 Global Net Lease 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 Global Net i.e., Global Net and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Global Net and ARMOUR Residential
Assuming the 90 days trading horizon Global Net Lease is expected to generate 1.44 times more return on investment than ARMOUR Residential. However, Global Net is 1.44 times more volatile than ARMOUR Residential REIT. It trades about -0.02 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about -0.16 per unit of risk. If you would invest 2,305 in Global Net Lease on August 24, 2024 and sell it today you would lose (14.00) from holding Global Net Lease or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Net Lease vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Global Net Lease |
| ARMOUR Residential REIT |
Global Net and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Net and ARMOUR Residential
The main advantage of trading using opposite Global Net and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net 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.| Global Net vs. Modiv Inc | Global Net vs. Precinct Properties New | Global Net vs. Global Net Lease | Global Net vs. NexPoint Diversified Real |
| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. New York Mortgage |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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