Correlation Between Lument Finance and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Lument Finance 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 Lument Finance and ARMOUR Residential 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 ARMOUR Residential REIT, you can compare the effects of market volatilities on Lument Finance 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 Lument Finance with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and ARMOUR Residential.
Diversification Opportunities for Lument Finance and ARMOUR Residential
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lument and ARMOUR is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust 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 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 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 Lument Finance i.e., Lument Finance and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Lument Finance and ARMOUR Residential
Considering the 90-day investment horizon Lument Finance Trust is expected to generate 1.13 times more return on investment than ARMOUR Residential. However, Lument Finance is 1.13 times more volatile than ARMOUR Residential REIT. It trades about 0.07 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.0 per unit of risk. If you would invest 176.00 in Lument Finance Trust on September 12, 2024 and sell it today you would earn a total of 88.00 from holding Lument Finance Trust or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lument Finance Trust vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Lument Finance Trust |
| ARMOUR Residential REIT |
Lument Finance and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lument Finance and ARMOUR Residential
The main advantage of trading using opposite Lument Finance and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lument Finance 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.| Lument Finance vs. Acres Commercial Realty | Lument Finance vs. AG Mortgage Investment | Lument Finance vs. Rithm Capital Corp | Lument Finance vs. Ares Commercial Real |
| ARMOUR Residential vs. Ellington Financial | ARMOUR Residential vs. Two Harbors Investments | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Ellington Residential Mortgage |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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