Correlation Between AG Mortgage and Two Harbors
Can any of the company-specific risk be diversified away by investing in both AG Mortgage and Two Harbors 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 AG Mortgage and Two Harbors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AG Mortgage Investment and Two Harbors Investment, you can compare the effects of market volatilities on AG Mortgage and Two Harbors 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 AG Mortgage with a short position of Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of AG Mortgage and Two Harbors.
Diversification Opportunities for AG Mortgage and Two Harbors
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MITT-PB and Two is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and Two Harbors Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investment and AG Mortgage 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 AG Mortgage Investment are associated (or correlated) with Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investment has no effect on the direction of AG Mortgage i.e., AG Mortgage and Two Harbors go up and down completely randomly.
Pair Corralation between AG Mortgage and Two Harbors
Assuming the 90 days trading horizon AG Mortgage Investment is expected to under-perform the Two Harbors. In addition to that, AG Mortgage is 2.23 times more volatile than Two Harbors Investment. It trades about -0.01 of its total potential returns per unit of risk. Two Harbors Investment is currently generating about 0.16 per unit of volatility. If you would invest 2,467 in Two Harbors Investment on August 31, 2024 and sell it today you would earn a total of 27.00 from holding Two Harbors Investment or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AG Mortgage Investment vs. Two Harbors Investment
Performance |
| Timeline |
| AG Mortgage Investment |
| Two Harbors Investment |
AG Mortgage and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AG Mortgage and Two Harbors
The main advantage of trading using opposite AG Mortgage and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' long position.| AG Mortgage vs. MFA Financial | AG Mortgage vs. Chimera Investment | AG Mortgage vs. Two Harbors Investment | AG Mortgage vs. Chimera Investment |
| Two Harbors vs. Lument Finance Trust | Two Harbors vs. PennyMac Mortgage Investment | Two Harbors vs. AG Mortgage Investment | Two Harbors vs. Invesco Mortgage Capital |
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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