Correlation Between New York and Starwood Property
Can any of the company-specific risk be diversified away by investing in both New York and Starwood Property 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 New York and Starwood Property into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New York Mortgage and Starwood Property Trust, you can compare the effects of market volatilities on New York and Starwood Property 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 New York with a short position of Starwood Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and Starwood Property.
Diversification Opportunities for New York and Starwood Property
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Starwood is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding New York Mortgage and Starwood Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starwood Property Trust and New York 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 New York Mortgage are associated (or correlated) with Starwood Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starwood Property Trust has no effect on the direction of New York i.e., New York and Starwood Property go up and down completely randomly.
Pair Corralation between New York and Starwood Property
Given the investment horizon of 90 days New York Mortgage is expected to generate 2.12 times more return on investment than Starwood Property. However, New York is 2.12 times more volatile than Starwood Property Trust. It trades about 0.41 of its potential returns per unit of risk. Starwood Property Trust is currently generating about 0.09 per unit of risk. If you would invest 528.00 in New York Mortgage on August 27, 2024 and sell it today you would earn a total of 86.00 from holding New York Mortgage or generate 16.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Mortgage vs. Starwood Property Trust
Performance |
| Timeline |
| New York Mortgage |
| Starwood Property Trust |
New York and Starwood Property Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and Starwood Property
The main advantage of trading using opposite New York and Starwood Property positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York position performs unexpectedly, Starwood Property 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 Starwood Property will offset losses from the drop in Starwood Property's long position.| New York vs. Two Harbors Investments | New York vs. ARMOUR Residential REIT | New York vs. Annaly Capital Management | New York vs. AGNC Investment Corp |
| Starwood Property vs. Blackstone Mortgage Trust | Starwood Property vs. Arbor Realty Trust | Starwood Property vs. Apollo Commercial Real | Starwood Property vs. Omega Healthcare Investors |
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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