Correlation Between Granite Point and Annaly Capital
Can any of the company-specific risk be diversified away by investing in both Granite Point and Annaly Capital 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 Granite Point and Annaly Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Granite Point Mortgage and Annaly Capital Management, you can compare the effects of market volatilities on Granite Point and Annaly Capital 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 Granite Point with a short position of Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Point and Annaly Capital.
Diversification Opportunities for Granite Point and Annaly Capital
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and Annaly is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point Mortgage and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management and Granite Point 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 Granite Point Mortgage are associated (or correlated) with Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of Granite Point i.e., Granite Point and Annaly Capital go up and down completely randomly.
Pair Corralation between Granite Point and Annaly Capital
Assuming the 90 days trading horizon Granite Point Mortgage is expected to generate 4.59 times more return on investment than Annaly Capital. However, Granite Point is 4.59 times more volatile than Annaly Capital Management. It trades about 0.19 of its potential returns per unit of risk. Annaly Capital Management is currently generating about 0.12 per unit of risk. If you would invest 1,674 in Granite Point Mortgage on August 27, 2024 and sell it today you would earn a total of 71.00 from holding Granite Point Mortgage or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Granite Point Mortgage vs. Annaly Capital Management
Performance |
| Timeline |
| Granite Point Mortgage |
| Annaly Capital Management |
Granite Point and Annaly Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Point and Annaly Capital
The main advantage of trading using opposite Granite Point and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Point position performs unexpectedly, Annaly Capital 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.The idea behind Granite Point Mortgage and Annaly Capital Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Annaly Capital vs. Annaly Capital Management | Annaly Capital vs. AGNC Investment Corp | Annaly Capital vs. Invesco Mortgage Capital | Annaly Capital vs. Invesco Mortgage Capital |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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