Correlation Between AG Mortgage and TPG RE
Can any of the company-specific risk be diversified away by investing in both AG Mortgage and TPG RE 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 TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on AG Mortgage and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of AG Mortgage and TPG RE.
Diversification Opportunities for AG Mortgage and TPG RE
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MITT-PC and TPG is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of AG Mortgage i.e., AG Mortgage and TPG RE go up and down completely randomly.
Pair Corralation between AG Mortgage and TPG RE
Assuming the 90 days trading horizon AG Mortgage Investment is expected to generate 0.53 times more return on investment than TPG RE. However, AG Mortgage Investment is 1.89 times less risky than TPG RE. It trades about 0.14 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.05 per unit of risk. If you would invest 1,419 in AG Mortgage Investment on August 30, 2024 and sell it today you would earn a total of 1,125 from holding AG Mortgage Investment or generate 79.28% 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. TPG RE Finance
Performance |
| Timeline |
| AG Mortgage Investment |
| TPG RE Finance |
AG Mortgage and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AG Mortgage and TPG RE
The main advantage of trading using opposite AG Mortgage and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE's long position.| AG Mortgage vs. AG Mortgage Investment | AG Mortgage vs. AG Mortgage Investment | AG Mortgage vs. Invesco Mortgage Capital | AG Mortgage vs. Invesco Mortgage Capital |
| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Dynex Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. AG 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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