Correlation Between TPG RE and Annaly Capital
Can any of the company-specific risk be diversified away by investing in both TPG RE and Annaly Capital 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 Annaly Capital 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 Annaly Capital Management, you can compare the effects of market volatilities on TPG RE and Annaly Capital 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 Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG RE and Annaly Capital.
Diversification Opportunities for TPG RE and Annaly Capital
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TPG and Annaly is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of TPG RE i.e., TPG RE and Annaly Capital go up and down completely randomly.
Pair Corralation between TPG RE and Annaly Capital
Assuming the 90 days trading horizon TPG RE Finance is expected to generate 3.9 times more return on investment than Annaly Capital. However, TPG RE is 3.9 times more volatile than Annaly Capital Management. It trades about 0.11 of its potential returns per unit of risk. Annaly Capital Management is currently generating about 0.17 per unit of risk. If you would invest 1,647 in TPG RE Finance on August 24, 2024 and sell it today you would earn a total of 273.00 from holding TPG RE Finance or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TPG RE Finance vs. Annaly Capital Management
Performance |
| Timeline |
| TPG RE Finance |
| Annaly Capital Management |
TPG RE and Annaly Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG RE and Annaly Capital
The main advantage of trading using opposite TPG RE and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG RE position performs unexpectedly, Annaly Capital 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Arbor Realty Trust | TPG RE vs. Aquagold International | TPG RE vs. Morningstar Unconstrained Allocation |
| Annaly Capital vs. ACRES Commercial Realty | Annaly Capital vs. Chimera Investment | Annaly Capital vs. Cherry Hill Mortgage | Annaly Capital vs. Cherry Hill Mortgage |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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