Correlation Between TPG RE and MFA Financial
Can any of the company-specific risk be diversified away by investing in both TPG RE 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 TPG RE and MFA Financial 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 MFA Financial, you can compare the effects of market volatilities on TPG RE 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 TPG RE with a short position of MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG RE and MFA Financial.
Diversification Opportunities for TPG RE and MFA Financial
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between TPG and MFA is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial 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 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 TPG RE i.e., TPG RE and MFA Financial go up and down completely randomly.
Pair Corralation between TPG RE and MFA Financial
Assuming the 90 days trading horizon TPG RE Finance is expected to generate 1.88 times more return on investment than MFA Financial. However, TPG RE is 1.88 times more volatile than MFA Financial. It trades about 0.07 of its potential returns per unit of risk. MFA Financial is currently generating about 0.13 per unit of risk. If you would invest 1,794 in TPG RE Finance on November 9, 2024 and sell it today you would earn a total of 21.00 from holding TPG RE Finance or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TPG RE Finance vs. MFA Financial
Performance |
| Timeline |
| TPG RE Finance |
| MFA Financial |
TPG RE and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG RE and MFA Financial
The main advantage of trading using opposite TPG RE and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG RE 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.| TPG RE vs. KKR Real Estate | TPG RE vs. Ready Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. ACRES Commercial Realty |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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