Correlation Between Lument Finance and Two Harbors
Can any of the company-specific risk be diversified away by investing in both Lument Finance and Two Harbors 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 Two Harbors 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 Two Harbors Investment, you can compare the effects of market volatilities on Lument Finance and Two Harbors 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 Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and Two Harbors.
Diversification Opportunities for Lument Finance and Two Harbors
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lument and Two is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and Two Harbors Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investment has no effect on the direction of Lument Finance i.e., Lument Finance and Two Harbors go up and down completely randomly.
Pair Corralation between Lument Finance and Two Harbors
Assuming the 90 days trading horizon Lument Finance is expected to generate 29.06 times less return on investment than Two Harbors. In addition to that, Lument Finance is 3.53 times more volatile than Two Harbors Investment. It trades about 0.0 of its total potential returns per unit of risk. Two Harbors Investment is currently generating about 0.16 per unit of volatility. If you would invest 2,468 in Two Harbors Investment on September 2, 2024 and sell it today you would earn a total of 27.00 from holding Two Harbors Investment or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lument Finance Trust vs. Two Harbors Investment
Performance |
| Timeline |
| Lument Finance Trust |
| Two Harbors Investment |
Lument Finance and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lument Finance and Two Harbors
The main advantage of trading using opposite Lument Finance and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lument Finance position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' 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 |
| Two Harbors vs. Lument Finance Trust | Two Harbors vs. PennyMac Mortgage Investment | Two Harbors vs. AG Mortgage Investment | Two Harbors 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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