Correlation Between MFA Financial and Western Asset
Can any of the company-specific risk be diversified away by investing in both MFA Financial and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFA Financial and Western Asset Mortgage, you can compare the effects of market volatilities on MFA Financial and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFA Financial and Western Asset.
Diversification Opportunities for MFA Financial and Western Asset
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MFA and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Western Asset Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Mortgage 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Mortgage has no effect on the direction of MFA Financial i.e., MFA Financial and Western Asset go up and down completely randomly.
Pair Corralation between MFA Financial and Western Asset
Considering the 90-day investment horizon MFA Financial is expected to generate 1.81 times less return on investment than Western Asset. But when comparing it to its historical volatility, MFA Financial is 1.18 times less risky than Western Asset. It trades about 0.04 of its potential returns per unit of risk. Western Asset Mortgage is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 811.00 in Western Asset Mortgage on August 24, 2024 and sell it today you would earn a total of 146.00 from holding Western Asset Mortgage or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 32.06% |
| Values | Daily Returns |
MFA Financial vs. Western Asset Mortgage
Performance |
| Timeline |
| MFA Financial |
| Western Asset Mortgage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
MFA Financial and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFA Financial and Western Asset
The main advantage of trading using opposite MFA Financial and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFA Financial position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| MFA Financial vs. Chimera Investment | MFA Financial vs. ARMOUR Residential REIT | MFA Financial vs. Orchid Island Capital | MFA Financial vs. Invesco Mortgage Capital |
| Western Asset vs. Granite Point Mortgage | Western Asset vs. Invesco Mortgage Capital | Western Asset vs. Ellington Residential Mortgage | Western Asset vs. Chimera 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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