Correlation Between New York and TPG RE
Can any of the company-specific risk be diversified away by investing in both New York and TPG RE 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 TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on New York and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and TPG RE.
Diversification Opportunities for New York and TPG RE
Very poor diversification
The 3 months correlation between New and TPG is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding New York Mortgage and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of New York i.e., New York and TPG RE go up and down completely randomly.
Pair Corralation between New York and TPG RE
Assuming the 90 days horizon New York Mortgage is expected to under-perform the TPG RE. But the preferred stock apears to be less risky and, when comparing its historical volatility, New York Mortgage is 1.67 times less risky than TPG RE. The preferred stock trades about -0.14 of its potential returns per unit of risk. The TPG RE Finance is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,948 in TPG RE Finance on August 30, 2024 and sell it today you would lose (24.00) from holding TPG RE Finance or give up 1.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Mortgage vs. TPG RE Finance
Performance |
| Timeline |
| New York Mortgage |
| TPG RE Finance |
New York and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and TPG RE
The main advantage of trading using opposite New York and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE's long position.| New York vs. NexPoint Real Estate | New York vs. TPG RE Finance | New York vs. New York Mortgage | New York vs. New York Mortgage |
| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Dynex Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. AG Mortgage 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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