Correlation Between Redwood Trust and Invesco Mortgage
Can any of the company-specific risk be diversified away by investing in both Redwood Trust and Invesco Mortgage 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 Invesco Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Trust and Invesco Mortgage Capital, you can compare the effects of market volatilities on Redwood Trust and Invesco Mortgage 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 Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Trust and Invesco Mortgage.
Diversification Opportunities for Redwood Trust and Invesco Mortgage
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Redwood and Invesco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Trust and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital 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 Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of Redwood Trust i.e., Redwood Trust and Invesco Mortgage go up and down completely randomly.
Pair Corralation between Redwood Trust and Invesco Mortgage
Considering the 90-day investment horizon Redwood Trust is expected to under-perform the Invesco Mortgage. But the stock apears to be less risky and, when comparing its historical volatility, Redwood Trust is 1.12 times less risky than Invesco Mortgage. The stock trades about -0.06 of its potential returns per unit of risk. The Invesco Mortgage Capital is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 783.00 in Invesco Mortgage Capital on October 24, 2024 and sell it today you would earn a total of 32.50 from holding Invesco Mortgage Capital or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Trust vs. Invesco Mortgage Capital
Performance |
| Timeline |
| Redwood Trust |
| Invesco Mortgage Capital |
Redwood Trust and Invesco Mortgage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Trust and Invesco Mortgage
The main advantage of trading using opposite Redwood Trust and Invesco Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Trust position performs unexpectedly, Invesco Mortgage 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 Invesco Mortgage will offset losses from the drop in Invesco Mortgage'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 |
| Invesco Mortgage vs. MFA Financial | Invesco Mortgage vs. Two Harbors Investments | Invesco Mortgage vs. New York Mortgage | Invesco Mortgage vs. ARMOUR Residential REIT |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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