Correlation Between Redwood Trust and MFA Financial
Can any of the company-specific risk be diversified away by investing in both Redwood Trust and MFA Financial 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 MFA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redwood Trust and MFA Financial, you can compare the effects of market volatilities on Redwood Trust and MFA Financial 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 MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redwood Trust and MFA Financial.
Diversification Opportunities for Redwood Trust and MFA Financial
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Redwood and MFA is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Redwood Trust and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Redwood Trust i.e., Redwood Trust and MFA Financial go up and down completely randomly.
Pair Corralation between Redwood Trust and MFA Financial
Considering the 90-day investment horizon Redwood Trust is expected to generate 3.63 times more return on investment than MFA Financial. However, Redwood Trust is 3.63 times more volatile than MFA Financial. It trades about 0.17 of its potential returns per unit of risk. MFA Financial is currently generating about 0.13 per unit of risk. If you would invest 638.00 in Redwood Trust on November 9, 2024 and sell it today you would earn a total of 34.00 from holding Redwood Trust or generate 5.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redwood Trust vs. MFA Financial
Performance |
| Timeline |
| Redwood Trust |
| MFA Financial |
Redwood Trust and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redwood Trust and MFA Financial
The main advantage of trading using opposite Redwood Trust and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redwood Trust position performs unexpectedly, MFA Financial 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 MFA Financial will offset losses from the drop in MFA Financial'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 |
| MFA Financial vs. MFA Financial | MFA Financial vs. ARMOUR Residential REIT | MFA Financial vs. Annaly Capital Management | MFA Financial vs. Two Harbors 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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