Correlation Between MFA Financial and Sachem Capital
Can any of the company-specific risk be diversified away by investing in both MFA Financial and Sachem 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 Sachem 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 Sachem Capital Corp, you can compare the effects of market volatilities on MFA Financial and Sachem 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and Sachem Capital.
Diversification Opportunities for MFA Financial and Sachem Capital
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MFA and Sachem is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of MFA Financial i.e., MFA Financial and Sachem Capital go up and down completely randomly.
Pair Corralation between MFA Financial and Sachem Capital
Assuming the 90 days trading horizon MFA Financial is expected to generate 17.95 times less return on investment than Sachem Capital. But when comparing it to its historical volatility, MFA Financial is 4.35 times less risky than Sachem Capital. It trades about 0.12 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 1,549 in Sachem Capital Corp on November 1, 2024 and sell it today you would earn a total of 350.00 from holding Sachem Capital Corp or generate 22.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFA Financial vs. Sachem Capital Corp
Performance |
| Timeline |
| MFA Financial |
| Sachem Capital Corp |
MFA Financial and Sachem Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and Sachem Capital
The main advantage of trading using opposite MFA Financial and Sachem Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, Sachem 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 Sachem Capital will offset losses from the drop in Sachem Capital's long position.| MFA Financial vs. MFA Financial | MFA Financial vs. ARMOUR Residential REIT | MFA Financial vs. Annaly Capital Management | MFA Financial vs. Two Harbors Investment |
| Sachem Capital vs. Ready Capital | Sachem Capital vs. ARMOUR Residential REIT | Sachem Capital vs. PennyMac Mortgage Investment | Sachem Capital vs. MFA Financial |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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