Correlation Between Granite Point and TPG RE
Can any of the company-specific risk be diversified away by investing in both Granite Point and TPG RE 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 TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on Granite Point and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Granite Point and TPG RE.
Diversification Opportunities for Granite Point and TPG RE
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Granite and TPG is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point Mortgage and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of Granite Point i.e., Granite Point and TPG RE go up and down completely randomly.
Pair Corralation between Granite Point and TPG RE
Assuming the 90 days trading horizon Granite Point is expected to generate 2.15 times less return on investment than TPG RE. But when comparing it to its historical volatility, Granite Point Mortgage is 1.53 times less risky than TPG RE. It trades about 0.04 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,336 in TPG RE Finance on August 30, 2024 and sell it today you would earn a total of 588.00 from holding TPG RE Finance or generate 44.01% 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. TPG RE Finance
Performance |
| Timeline |
| Granite Point Mortgage |
| TPG RE Finance |
Granite Point and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Granite Point and TPG RE
The main advantage of trading using opposite Granite Point and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Point position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE's long position.| Granite Point vs. PennyMac Mortgage Investment | Granite Point vs. Rithm Capital Corp | Granite Point vs. ARMOUR Residential REIT | Granite Point vs. MFA Financial |
| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Dynex Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. AG Mortgage 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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