Correlation Between Redwood Trust and AGNC Investment
Can any of the company-specific risk be diversified away by investing in both Redwood Trust and AGNC Investment 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 Redwood Trust and AGNC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Trust and AGNC Investment Corp, you can compare the effects of market volatilities on Redwood Trust and AGNC Investment 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 Redwood Trust with a short position of AGNC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Trust and AGNC Investment.
Diversification Opportunities for Redwood Trust and AGNC Investment
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Redwood and AGNC is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Trust and AGNC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC Investment Corp and Redwood Trust 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 Redwood Trust are associated (or correlated) with AGNC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC Investment Corp has no effect on the direction of Redwood Trust i.e., Redwood Trust and AGNC Investment go up and down completely randomly.
Pair Corralation between Redwood Trust and AGNC Investment
Considering the 90-day investment horizon Redwood Trust is expected to generate 3.28 times less return on investment than AGNC Investment. In addition to that, Redwood Trust is 4.34 times more volatile than AGNC Investment Corp. It trades about 0.01 of its total potential returns per unit of risk. AGNC Investment Corp is currently generating about 0.17 per unit of volatility. If you would invest 2,061 in AGNC Investment Corp on September 12, 2024 and sell it today you would earn a total of 414.00 from holding AGNC Investment Corp or generate 20.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Trust vs. AGNC Investment Corp
Performance |
| Timeline |
| Redwood Trust |
| AGNC Investment Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Redwood Trust and AGNC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Trust and AGNC Investment
The main advantage of trading using opposite Redwood Trust and AGNC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Trust position performs unexpectedly, AGNC Investment 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 AGNC Investment will offset losses from the drop in AGNC Investment's long position.| Redwood Trust vs. Two Harbors Investments | Redwood Trust vs. AG Mortgage Investment | Redwood Trust vs. Invesco Mortgage Capital | Redwood Trust 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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