Correlation Between MFA Financial and Annaly Capital
Can any of the company-specific risk be diversified away by investing in both MFA Financial and Annaly Capital 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 Annaly Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFA Financial and Annaly Capital Management, you can compare the effects of market volatilities on MFA Financial and Annaly Capital 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 Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and Annaly Capital.
Diversification Opportunities for MFA Financial and Annaly Capital
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MFA and Annaly is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of MFA Financial i.e., MFA Financial and Annaly Capital go up and down completely randomly.
Pair Corralation between MFA Financial and Annaly Capital
Assuming the 90 days trading horizon MFA Financial is expected to generate 2.55 times more return on investment than Annaly Capital. However, MFA Financial is 2.55 times more volatile than Annaly Capital Management. It trades about 0.24 of its potential returns per unit of risk. Annaly Capital Management is currently generating about 0.13 per unit of risk. If you would invest 2,390 in MFA Financial on August 27, 2024 and sell it today you would earn a total of 69.00 from holding MFA Financial or generate 2.89% 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. Annaly Capital Management
Performance |
| Timeline |
| MFA Financial |
| Annaly Capital Management |
MFA Financial and Annaly Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and Annaly Capital
The main advantage of trading using opposite MFA Financial and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, Annaly Capital 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.| MFA Financial vs. Annaly Capital Management | MFA Financial vs. AGNC Investment Corp | MFA Financial vs. Invesco Mortgage Capital | MFA Financial vs. Invesco Mortgage Capital |
| Annaly Capital vs. PennyMac Mortgage Investment | Annaly Capital vs. Two Harbors Investment | Annaly Capital vs. Chimera Investment | Annaly Capital 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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