Correlation Between Two Harbors and ARMOUR Residential
Can any of the company-specific risk be diversified away by investing in both Two Harbors and ARMOUR Residential 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 ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Two Harbors Investments and ARMOUR Residential REIT, you can compare the effects of market volatilities on Two Harbors and ARMOUR Residential 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 ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and ARMOUR Residential.
Diversification Opportunities for Two Harbors and ARMOUR Residential
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Two and ARMOUR is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investments and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT 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 Investments are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Two Harbors i.e., Two Harbors and ARMOUR Residential go up and down completely randomly.
Pair Corralation between Two Harbors and ARMOUR Residential
Considering the 90-day investment horizon Two Harbors Investments is expected to generate 1.02 times more return on investment than ARMOUR Residential. However, Two Harbors is 1.02 times more volatile than ARMOUR Residential REIT. It trades about 0.01 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.0 per unit of risk. If you would invest 1,207 in Two Harbors Investments on August 27, 2024 and sell it today you would lose (33.00) from holding Two Harbors Investments or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Two Harbors Investments vs. ARMOUR Residential REIT
Performance |
| Timeline |
| Two Harbors Investments |
| ARMOUR Residential REIT |
Two Harbors and ARMOUR Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Two Harbors and ARMOUR Residential
The main advantage of trading using opposite Two Harbors and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.| Two Harbors vs. New York Mortgage | Two Harbors vs. ARMOUR Residential REIT | Two Harbors vs. Annaly Capital Management | Two Harbors vs. AGNC Investment Corp |
| ARMOUR Residential vs. Blackstone Mortgage Trust | ARMOUR Residential vs. Omega Healthcare Investors | ARMOUR Residential vs. Medical Properties Trust |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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