Correlation Between Lument Finance and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both Lument Finance and Chimera Investment 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 Lument Finance and Chimera Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lument Finance Trust and Chimera Investment, you can compare the effects of market volatilities on Lument Finance and Chimera Investment 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 Lument Finance with a short position of Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and Chimera Investment.
Diversification Opportunities for Lument Finance and Chimera Investment
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lument and Chimera is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment and Lument Finance 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 Lument Finance Trust are associated (or correlated) with Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Lument Finance i.e., Lument Finance and Chimera Investment go up and down completely randomly.
Pair Corralation between Lument Finance and Chimera Investment
Assuming the 90 days trading horizon Lument Finance Trust is expected to generate 3.59 times more return on investment than Chimera Investment. However, Lument Finance is 3.59 times more volatile than Chimera Investment. It trades about 0.04 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.06 per unit of risk. If you would invest 1,601 in Lument Finance Trust on August 27, 2024 and sell it today you would earn a total of 644.00 from holding Lument Finance Trust or generate 40.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.18% |
| Values | Daily Returns |
Lument Finance Trust vs. Chimera Investment
Performance |
| Timeline |
| Lument Finance Trust |
| Chimera Investment |
Lument Finance and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lument Finance and Chimera Investment
The main advantage of trading using opposite Lument Finance and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lument Finance position performs unexpectedly, Chimera Investment 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 Chimera Investment will offset losses from the drop in Chimera Investment's long position.| Lument Finance vs. Rithm Capital Corp | Lument Finance vs. PennyMac Mortgage Investment | Lument Finance vs. AGNC Investment Corp |
| Chimera Investment vs. Chimera Investment | Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment vs. Two Harbors Investment | Chimera Investment vs. Chimera 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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