Correlation Between MFA Financial and Extendicare
Can any of the company-specific risk be diversified away by investing in both MFA Financial and Extendicare 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 MFA Financial and Extendicare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFA Financial and Extendicare, you can compare the effects of market volatilities on MFA Financial and Extendicare 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 MFA Financial with a short position of Extendicare. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and Extendicare.
Diversification Opportunities for MFA Financial and Extendicare
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MFA and Extendicare is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Extendicare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extendicare and MFA Financial 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 MFA Financial are associated (or correlated) with Extendicare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extendicare has no effect on the direction of MFA Financial i.e., MFA Financial and Extendicare go up and down completely randomly.
Pair Corralation between MFA Financial and Extendicare
Assuming the 90 days trading horizon MFA Financial is expected to generate 1.08 times less return on investment than Extendicare. In addition to that, MFA Financial is 1.16 times more volatile than Extendicare. It trades about 0.07 of its total potential returns per unit of risk. Extendicare is currently generating about 0.09 per unit of volatility. If you would invest 484.00 in Extendicare on August 30, 2024 and sell it today you would earn a total of 16.00 from holding Extendicare or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 8.47% |
| Values | Daily Returns |
MFA Financial vs. Extendicare
Performance |
| Timeline |
| MFA Financial |
| Extendicare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
MFA Financial and Extendicare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and Extendicare
The main advantage of trading using opposite MFA Financial and Extendicare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, Extendicare 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 Extendicare will offset losses from the drop in Extendicare's long position.| MFA Financial vs. New York Mortgage | MFA Financial vs. New York Mortgage | MFA Financial vs. Two Harbors Investment | MFA Financial vs. Two Harbors Investment |
| Extendicare vs. Ramsay Health Care | Extendicare vs. Jack Nathan Medical | Extendicare vs. Nova Leap Health | Extendicare vs. Fresenius SE Co |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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