Correlation Between Western Asset and MFA Financial
Can any of the company-specific risk be diversified away by investing in both Western Asset and MFA Financial 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 Western Asset and MFA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and MFA Financial, you can compare the effects of market volatilities on Western Asset and MFA Financial 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 Western Asset with a short position of MFA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and MFA Financial.
Diversification Opportunities for Western Asset and MFA Financial
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and MFA is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and MFA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFA Financial and Western Asset 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 Western Asset Mortgage are associated (or correlated) with MFA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFA Financial has no effect on the direction of Western Asset i.e., Western Asset and MFA Financial go up and down completely randomly.
Pair Corralation between Western Asset and MFA Financial
If you would invest 957.00 in Western Asset Mortgage on August 27, 2024 and sell it today you would earn a total of 0.00 from holding Western Asset Mortgage or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Western Asset Mortgage vs. MFA Financial
Performance |
| Timeline |
| Western Asset Mortgage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| MFA Financial |
Western Asset and MFA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and MFA Financial
The main advantage of trading using opposite Western Asset and MFA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, MFA Financial 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 MFA Financial will offset losses from the drop in MFA Financial's long position.| Western Asset vs. Granite Point Mortgage | Western Asset vs. Invesco Mortgage Capital | Western Asset vs. Ellington Residential Mortgage | Western Asset vs. Chimera Investment |
| MFA Financial vs. Chimera Investment | MFA Financial vs. ARMOUR Residential REIT | MFA Financial vs. Orchid Island Capital | MFA Financial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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