Correlation Between Two Harbors and Cherry Hill
Can any of the company-specific risk be diversified away by investing in both Two Harbors and Cherry Hill 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 Cherry Hill 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 Cherry Hill Mortgage, you can compare the effects of market volatilities on Two Harbors and Cherry Hill 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 Cherry Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and Cherry Hill.
Diversification Opportunities for Two Harbors and Cherry Hill
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Two and Cherry is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill 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 Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Two Harbors i.e., Two Harbors and Cherry Hill go up and down completely randomly.
Pair Corralation between Two Harbors and Cherry Hill
Assuming the 90 days trading horizon Two Harbors Investment is expected to generate 0.85 times more return on investment than Cherry Hill. However, Two Harbors Investment is 1.18 times less risky than Cherry Hill. It trades about 0.12 of its potential returns per unit of risk. Cherry Hill Mortgage is currently generating about 0.08 per unit of risk. If you would invest 1,838 in Two Harbors Investment on August 24, 2024 and sell it today you would earn a total of 534.00 from holding Two Harbors Investment or generate 29.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Two Harbors Investment vs. Cherry Hill Mortgage
Performance |
| Timeline |
| Two Harbors Investment |
| Cherry Hill Mortgage |
Two Harbors and Cherry Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and Cherry Hill
The main advantage of trading using opposite Two Harbors and Cherry Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors position performs unexpectedly, Cherry Hill 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 Cherry Hill will offset losses from the drop in Cherry Hill's long position.| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment |
| Cherry Hill vs. Lument Finance Trust | Cherry Hill vs. PennyMac Mortgage Investment | Cherry Hill vs. AG Mortgage Investment | Cherry Hill 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.
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