Correlation Between AG Mortgage and Redwood Trust
Can any of the company-specific risk be diversified away by investing in both AG Mortgage and Redwood Trust 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 Redwood Trust 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 Redwood Trust, you can compare the effects of market volatilities on AG Mortgage and Redwood Trust 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 Redwood Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of AG Mortgage and Redwood Trust.
Diversification Opportunities for AG Mortgage and Redwood Trust
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MITT and Redwood is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and Redwood Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redwood Trust 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 Redwood Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redwood Trust has no effect on the direction of AG Mortgage i.e., AG Mortgage and Redwood Trust go up and down completely randomly.
Pair Corralation between AG Mortgage and Redwood Trust
Given the investment horizon of 90 days AG Mortgage is expected to generate 3.05 times less return on investment than Redwood Trust. In addition to that, AG Mortgage is 1.1 times more volatile than Redwood Trust. It trades about 0.03 of its total potential returns per unit of risk. Redwood Trust is currently generating about 0.09 per unit of volatility. If you would invest 619.00 in Redwood Trust on September 3, 2024 and sell it today you would earn a total of 100.00 from holding Redwood Trust or generate 16.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AG Mortgage Investment vs. Redwood Trust
Performance |
| Timeline |
| AG Mortgage Investment |
| Redwood Trust |
AG Mortgage and Redwood Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AG Mortgage and Redwood Trust
The main advantage of trading using opposite AG Mortgage and Redwood Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage position performs unexpectedly, Redwood Trust 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 Redwood Trust will offset losses from the drop in Redwood Trust's long position.| AG Mortgage vs. New York Mortgage | AG Mortgage vs. Ellington Residential Mortgage | AG Mortgage vs. Invesco Mortgage Capital | AG Mortgage vs. TPG RE Finance |
| Redwood Trust vs. ARMOUR Residential REIT | Redwood Trust vs. Ellington Financial | Redwood Trust vs. Ares Commercial Real | Redwood Trust vs. Cherry Hill Mortgage |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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