Correlation Between MFA Financial and Invesco Mortgage
Can any of the company-specific risk be diversified away by investing in both MFA Financial and Invesco Mortgage 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 Invesco Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFA Financial and Invesco Mortgage Capital, you can compare the effects of market volatilities on MFA Financial and Invesco Mortgage 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 Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and Invesco Mortgage.
Diversification Opportunities for MFA Financial and Invesco Mortgage
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MFA and Invesco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital 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 Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of MFA Financial i.e., MFA Financial and Invesco Mortgage go up and down completely randomly.
Pair Corralation between MFA Financial and Invesco Mortgage
Considering the 90-day investment horizon MFA Financial is expected to generate 1.11 times more return on investment than Invesco Mortgage. However, MFA Financial is 1.11 times more volatile than Invesco Mortgage Capital. It trades about 0.06 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about -0.02 per unit of risk. If you would invest 994.00 in MFA Financial on August 24, 2024 and sell it today you would earn a total of 99.00 from holding MFA Financial or generate 9.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFA Financial vs. Invesco Mortgage Capital
Performance |
| Timeline |
| MFA Financial |
| Invesco Mortgage Capital |
MFA Financial and Invesco Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and Invesco Mortgage
The main advantage of trading using opposite MFA Financial and Invesco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, Invesco Mortgage 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 Invesco Mortgage will offset losses from the drop in Invesco Mortgage's long position.| MFA Financial vs. Lument Finance Trust | MFA Financial vs. AG Mortgage Investment | MFA Financial vs. Rithm Capital Corp | MFA Financial vs. Cherry Hill Mortgage |
| Invesco Mortgage vs. MFA Financial | Invesco Mortgage vs. Two Harbors Investments | Invesco Mortgage vs. New York Mortgage | Invesco Mortgage vs. ARMOUR Residential REIT |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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