Correlation Between Invesco Mortgage and Lument Finance
Can any of the company-specific risk be diversified away by investing in both Invesco Mortgage and Lument Finance 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 Lument Finance 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 Lument Finance Trust, you can compare the effects of market volatilities on Invesco Mortgage and Lument Finance 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 Lument Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Mortgage and Lument Finance.
Diversification Opportunities for Invesco Mortgage and Lument Finance
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Invesco and Lument is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Mortgage Capital and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust 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 Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Invesco Mortgage i.e., Invesco Mortgage and Lument Finance go up and down completely randomly.
Pair Corralation between Invesco Mortgage and Lument Finance
Assuming the 90 days trading horizon Invesco Mortgage is expected to generate 56.35 times less return on investment than Lument Finance. But when comparing it to its historical volatility, Invesco Mortgage Capital is 3.38 times less risky than Lument Finance. It trades about 0.01 of its potential returns per unit of risk. Lument Finance Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 258.00 in Lument Finance Trust on November 18, 2024 and sell it today you would earn a total of 14.00 from holding Lument Finance Trust or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco Mortgage Capital vs. Lument Finance Trust
Performance |
| Timeline |
| Invesco Mortgage Capital |
| Lument Finance Trust |
Invesco Mortgage and Lument Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco Mortgage and Lument Finance
The main advantage of trading using opposite Invesco Mortgage and Lument Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco Mortgage position performs unexpectedly, Lument Finance 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 Lument Finance will offset losses from the drop in Lument Finance's long position.| Invesco Mortgage vs. MFA Financial | Invesco Mortgage vs. Two Harbors Investment | Invesco Mortgage vs. Chimera Investment | Invesco Mortgage vs. Chimera Investment |
| Lument Finance vs. Acres Commercial Realty | Lument Finance vs. AG Mortgage Investment | Lument Finance vs. Rithm Capital Corp | Lument Finance vs. Ares Commercial Real |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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