Correlation Between Annaly Capital and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Annaly Capital and ARMOUR Residential 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 Annaly Capital and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management and ARMOUR Residential REIT, you can compare the effects of market volatilities on Annaly Capital and ARMOUR Residential 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 Annaly Capital with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and ARMOUR Residential.
Diversification Opportunities for Annaly Capital and ARMOUR Residential
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Annaly and ARMOUR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and Annaly Capital 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 Annaly Capital Management are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Annaly Capital i.e., Annaly Capital and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Annaly Capital and ARMOUR Residential
Assuming the 90 days trading horizon Annaly Capital is expected to generate 1.04 times less return on investment than ARMOUR Residential. But when comparing it to its historical volatility, Annaly Capital Management is 1.37 times less risky than ARMOUR Residential. It trades about 0.08 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,704 in ARMOUR Residential REIT on August 28, 2024 and sell it today you would earn a total of 551.00 from holding ARMOUR Residential REIT or generate 32.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Annaly Capital Management vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Annaly Capital Management |
| ARMOUR Residential REIT |
Annaly Capital and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Annaly Capital and ARMOUR Residential
The main advantage of trading using opposite Annaly Capital and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Annaly Capital vs. PennyMac Mortgage Investment | Annaly Capital vs. Two Harbors Investment | Annaly Capital vs. Chimera Investment | Annaly Capital vs. PennyMac Mortgage Investment |
| ARMOUR Residential vs. Annaly Capital Management | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential vs. Invesco Mortgage Capital | ARMOUR Residential 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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