Correlation Between New York and Two Harbors
Can any of the company-specific risk be diversified away by investing in both New York and Two Harbors 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 Two Harbors 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 Two Harbors Investment, you can compare the effects of market volatilities on New York and Two Harbors 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 Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and Two Harbors.
Diversification Opportunities for New York and Two Harbors
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between New and Two is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding New York Mortgage and Two Harbors Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investment 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investment has no effect on the direction of New York i.e., New York and Two Harbors go up and down completely randomly.
Pair Corralation between New York and Two Harbors
Assuming the 90 days horizon New York Mortgage is expected to generate 1.04 times more return on investment than Two Harbors. However, New York is 1.04 times more volatile than Two Harbors Investment. It trades about 0.24 of its potential returns per unit of risk. Two Harbors Investment is currently generating about -0.29 per unit of risk. If you would invest 2,212 in New York Mortgage on August 30, 2024 and sell it today you would earn a total of 70.00 from holding New York Mortgage or generate 3.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Mortgage vs. Two Harbors Investment
Performance |
| Timeline |
| New York Mortgage |
| Two Harbors Investment |
New York and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and Two Harbors
The main advantage of trading using opposite New York and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' long position.| New York vs. AG Mortgage Investment | New York vs. AG Mortgage Investment | New York vs. Invesco Mortgage Capital | New York vs. Invesco Mortgage Capital |
| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Invesco Mortgage Capital | Two Harbors vs. Chimera Investment | Two Harbors vs. MFA Financial |
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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