Correlation Between Lument Finance and TPG RE
Can any of the company-specific risk be diversified away by investing in both Lument Finance 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 Lument Finance and TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on Lument Finance 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 Lument Finance with a short position of TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and TPG RE.
Diversification Opportunities for Lument Finance and TPG RE
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lument and TPG is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust 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 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 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 Lument Finance i.e., Lument Finance and TPG RE go up and down completely randomly.
Pair Corralation between Lument Finance and TPG RE
Assuming the 90 days trading horizon Lument Finance Trust is expected to generate 2.66 times more return on investment than TPG RE. However, Lument Finance is 2.66 times more volatile than TPG RE Finance. It trades about 0.04 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.05 per unit of risk. If you would invest 1,712 in Lument Finance Trust on August 30, 2024 and sell it today you would earn a total of 553.00 from holding Lument Finance Trust or generate 32.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.98% |
| Values | Daily Returns |
Lument Finance Trust vs. TPG RE Finance
Performance |
| Timeline |
| Lument Finance Trust |
| TPG RE Finance |
Lument Finance and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lument Finance and TPG RE
The main advantage of trading using opposite Lument Finance and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lument Finance 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.| Lument Finance vs. ACRES Commercial Realty | Lument Finance vs. ACRES Commercial Realty | Lument Finance vs. KKR Real Estate | Lument Finance vs. NexPoint Real Estate |
| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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