Correlation Between MFA Financial and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both MFA Financial and Chimera Investment 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 Chimera Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFA Financial and Chimera Investment, you can compare the effects of market volatilities on MFA Financial and Chimera Investment 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 Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and Chimera Investment.
Diversification Opportunities for MFA Financial and Chimera Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MFA and Chimera is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of MFA Financial i.e., MFA Financial and Chimera Investment go up and down completely randomly.
Pair Corralation between MFA Financial and Chimera Investment
Assuming the 90 days trading horizon MFA Financial is expected to generate 1.64 times more return on investment than Chimera Investment. However, MFA Financial is 1.64 times more volatile than Chimera Investment. It trades about 0.11 of its potential returns per unit of risk. Chimera Investment is currently generating about 0.01 per unit of risk. If you would invest 2,390 in MFA Financial on August 29, 2024 and sell it today you would earn a total of 35.00 from holding MFA Financial or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFA Financial vs. Chimera Investment
Performance |
| Timeline |
| MFA Financial |
| Chimera Investment |
MFA Financial and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and Chimera Investment
The main advantage of trading using opposite MFA Financial and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, Chimera Investment 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 Chimera Investment will offset losses from the drop in Chimera Investment's long position.| MFA Financial vs. Annaly Capital Management | MFA Financial vs. Invesco Mortgage Capital | MFA Financial vs. Invesco Mortgage Capital | MFA Financial vs. Chimera Investment |
| Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment vs. Two Harbors Investment | Chimera Investment vs. Chimera Investment | Chimera Investment vs. PennyMac 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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