Correlation Between Western Asset and Two Harbors
Can any of the company-specific risk be diversified away by investing in both Western Asset and Two Harbors 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 Two Harbors 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 Two Harbors Investments, you can compare the effects of market volatilities on Western Asset and Two Harbors 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 Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Two Harbors.
Diversification Opportunities for Western Asset and Two Harbors
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Western and Two is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Two Harbors Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investments 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investments has no effect on the direction of Western Asset i.e., Western Asset and Two Harbors go up and down completely randomly.
Pair Corralation between Western Asset and Two Harbors
Considering the 90-day investment horizon Western Asset Mortgage is expected to generate 1.19 times more return on investment than Two Harbors. However, Western Asset is 1.19 times more volatile than Two Harbors Investments. It trades about 0.06 of its potential returns per unit of risk. Two Harbors Investments is currently generating about 0.0 per unit of risk. If you would invest 811.00 in Western Asset Mortgage on August 24, 2024 and sell it today you would earn a total of 146.00 from holding Western Asset Mortgage or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 32.06% |
| Values | Daily Returns |
Western Asset Mortgage vs. Two Harbors Investments
Performance |
| Timeline |
| Western Asset Mortgage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Two Harbors Investments |
Western Asset and Two Harbors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Two Harbors
The main advantage of trading using opposite Western Asset and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Two Harbors 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 Two Harbors will offset losses from the drop in Two Harbors' 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 |
| Two Harbors vs. New York Mortgage | Two Harbors vs. ARMOUR Residential REIT | Two Harbors vs. Annaly Capital Management | Two Harbors vs. AGNC Investment Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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