Correlation Between Lument Finance and MFA Financial
Can any of the company-specific risk be diversified away by investing in both Lument Finance and MFA Financial 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 MFA Financial 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 MFA Financial, you can compare the effects of market volatilities on Lument Finance and MFA Financial 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 MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and MFA Financial.
Diversification Opportunities for Lument Finance and MFA Financial
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lument and MFA is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Lument Finance i.e., Lument Finance and MFA Financial go up and down completely randomly.
Pair Corralation between Lument Finance and MFA Financial
Considering the 90-day investment horizon Lument Finance Trust is expected to generate 1.46 times more return on investment than MFA Financial. However, Lument Finance is 1.46 times more volatile than MFA Financial. It trades about 0.05 of its potential returns per unit of risk. MFA Financial is currently generating about -0.21 per unit of risk. If you would invest 253.00 in Lument Finance Trust on August 27, 2024 and sell it today you would earn a total of 6.00 from holding Lument Finance Trust or generate 2.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lument Finance Trust vs. MFA Financial
Performance |
| Timeline |
| Lument Finance Trust |
| MFA Financial |
Lument Finance and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lument Finance and MFA Financial
The main advantage of trading using opposite Lument Finance and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lument Finance position performs unexpectedly, MFA Financial 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 MFA Financial will offset losses from the drop in MFA Financial'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 |
| MFA Financial vs. Chimera Investment | MFA Financial vs. ARMOUR Residential REIT | MFA Financial vs. Orchid Island Capital | MFA Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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