Correlation Between Two Harbors and TPG RE
Can any of the company-specific risk be diversified away by investing in both Two Harbors and TPG RE 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 TPG RE 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 TPG RE Finance, you can compare the effects of market volatilities on Two Harbors and TPG RE 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 TPG RE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and TPG RE.
Diversification Opportunities for Two Harbors and TPG RE
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Two and TPG is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment and TPG RE Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPG RE Finance 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 TPG RE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPG RE Finance has no effect on the direction of Two Harbors i.e., Two Harbors and TPG RE go up and down completely randomly.
Pair Corralation between Two Harbors and TPG RE
Assuming the 90 days trading horizon Two Harbors Investment is expected to generate 0.55 times more return on investment than TPG RE. However, Two Harbors Investment is 1.83 times less risky than TPG RE. It trades about 0.13 of its potential returns per unit of risk. TPG RE Finance is currently generating about 0.07 per unit of risk. If you would invest 1,616 in Two Harbors Investment on August 27, 2024 and sell it today you would earn a total of 865.00 from holding Two Harbors Investment or generate 53.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Two Harbors Investment vs. TPG RE Finance
Performance |
| Timeline |
| Two Harbors Investment |
| TPG RE Finance |
Two Harbors and TPG RE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and TPG RE
The main advantage of trading using opposite Two Harbors and TPG RE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors position performs unexpectedly, TPG RE 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 TPG RE will offset losses from the drop in TPG RE's long position.| Two Harbors vs. Two Harbors Investment | Two Harbors vs. Chimera Investment | Two Harbors vs. Chimera Investment | Two Harbors 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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