Correlation Between Invesco Mortgage and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Invesco Mortgage 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 Invesco Mortgage and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco Mortgage Capital and ARMOUR Residential REIT, you can compare the effects of market volatilities on Invesco Mortgage 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 Invesco Mortgage with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Mortgage and ARMOUR Residential.
Diversification Opportunities for Invesco Mortgage and ARMOUR Residential
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Invesco and ARMOUR is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Mortgage Capital 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 Invesco Mortgage 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 Invesco Mortgage Capital 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 Invesco Mortgage i.e., Invesco Mortgage and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Invesco Mortgage and ARMOUR Residential
Assuming the 90 days trading horizon Invesco Mortgage Capital is expected to generate 1.41 times more return on investment than ARMOUR Residential. However, Invesco Mortgage is 1.41 times more volatile than ARMOUR Residential REIT. It trades about 0.09 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.08 per unit of risk. If you would invest 1,562 in Invesco Mortgage Capital on August 27, 2024 and sell it today you would earn a total of 818.00 from holding Invesco Mortgage Capital or generate 52.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Mortgage Capital vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Invesco Mortgage Capital |
| ARMOUR Residential REIT |
Invesco Mortgage and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Mortgage and ARMOUR Residential
The main advantage of trading using opposite Invesco Mortgage and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Mortgage 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.| Invesco Mortgage vs. MFA Financial | Invesco Mortgage vs. Two Harbors Investment | Invesco Mortgage vs. Chimera Investment | Invesco Mortgage vs. Chimera Investment |
| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. AGNC Investment Corp | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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