Correlation Between Annaly Capital and MFA Financial
Can any of the company-specific risk be diversified away by investing in both Annaly Capital and MFA Financial 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 MFA Financial 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 MFA Financial, you can compare the effects of market volatilities on Annaly Capital and MFA Financial 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 MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and MFA Financial.
Diversification Opportunities for Annaly Capital and MFA Financial
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Annaly and MFA is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Annaly Capital i.e., Annaly Capital and MFA Financial go up and down completely randomly.
Pair Corralation between Annaly Capital and MFA Financial
Assuming the 90 days trading horizon Annaly Capital is expected to generate 1.2 times less return on investment than MFA Financial. But when comparing it to its historical volatility, Annaly Capital Management is 1.6 times less risky than MFA Financial. It trades about 0.09 of its potential returns per unit of risk. MFA Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,575 in MFA Financial on August 31, 2024 and sell it today you would earn a total of 663.00 from holding MFA Financial or generate 42.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Annaly Capital Management vs. MFA Financial
Performance |
| Timeline |
| Annaly Capital Management |
| MFA Financial |
Annaly Capital and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Annaly Capital and MFA Financial
The main advantage of trading using opposite Annaly Capital and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital position performs unexpectedly, MFA Financial 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 MFA Financial will offset losses from the drop in MFA Financial's long position.| Annaly Capital vs. AGNC Investment Corp | Annaly Capital vs. Annaly Capital Management | Annaly Capital vs. AGNC Investment Corp | Annaly Capital vs. New York Mortgage |
| MFA Financial vs. MFA Financial | MFA Financial vs. Chimera Investment | MFA Financial vs. Two Harbors Investment | MFA Financial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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