Correlation Between Two Harbors and New York
Can any of the company-specific risk be diversified away by investing in both Two Harbors and New York 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 Two Harbors and New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Two Harbors Investment and New York Mortgage, you can compare the effects of market volatilities on Two Harbors and New York 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 Two Harbors with a short position of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and New York.
Diversification Opportunities for Two Harbors and New York
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Two and New is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Mortgage and Two Harbors 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 Two Harbors Investment are associated (or correlated) with New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Two Harbors i.e., Two Harbors and New York go up and down completely randomly.
Pair Corralation between Two Harbors and New York
Assuming the 90 days trading horizon Two Harbors Investment is expected to under-perform the New York. But the preferred stock apears to be less risky and, when comparing its historical volatility, Two Harbors Investment is 1.96 times less risky than New York. The preferred stock trades about -0.21 of its potential returns per unit of risk. The New York Mortgage is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,009 in New York Mortgage on August 30, 2024 and sell it today you would lose (24.00) from holding New York Mortgage or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Two Harbors Investment vs. New York Mortgage
Performance |
| Timeline |
| Two Harbors Investment |
| New York Mortgage |
Two Harbors and New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and New York
The main advantage of trading using opposite Two Harbors and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment |
| New York vs. AG Mortgage Investment | New York vs. AG Mortgage Investment | New York vs. Invesco Mortgage Capital | New York vs. Invesco Mortgage Capital |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |