Correlation Between TPG RE and Chimera Investment
Can any of the company-specific risk be diversified away by investing in both TPG RE and Chimera 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 TPG RE and Chimera Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPG RE Finance and Chimera Investment, you can compare the effects of market volatilities on TPG RE and Chimera 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 TPG RE with a short position of Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG RE and Chimera Investment.
Diversification Opportunities for TPG RE and Chimera Investment
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TPG and Chimera is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment and TPG RE 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 TPG RE Finance are associated (or correlated) with Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of TPG RE i.e., TPG RE and Chimera Investment go up and down completely randomly.
Pair Corralation between TPG RE and Chimera Investment
Assuming the 90 days trading horizon TPG RE Finance is expected to generate 0.84 times more return on investment than Chimera Investment. However, TPG RE Finance is 1.18 times less risky than Chimera Investment. It trades about -0.02 of its potential returns per unit of risk. Chimera Investment is currently generating about -0.05 per unit of risk. If you would invest 1,920 in TPG RE Finance on August 27, 2024 and sell it today you would lose (10.00) from holding TPG RE Finance or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TPG RE Finance vs. Chimera Investment
Performance |
| Timeline |
| TPG RE Finance |
| Chimera Investment |
TPG RE and Chimera Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG RE and Chimera Investment
The main advantage of trading using opposite TPG RE and Chimera Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG RE position performs unexpectedly, Chimera 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 Chimera Investment will offset losses from the drop in Chimera Investment's long position.The idea behind TPG RE Finance and Chimera Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Chimera Investment vs. Chimera Investment | Chimera Investment vs. PennyMac Mortgage Investment | Chimera Investment vs. Two Harbors Investment | Chimera Investment vs. Chimera 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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