Correlation Between AGNC Investment and Annaly Capital

Can any of the company-specific risk be diversified away by investing in both AGNC Investment and Annaly Capital 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 AGNC Investment and Annaly Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGNC Investment Corp and Annaly Capital Management, you can compare the effects of market volatilities on AGNC Investment and Annaly Capital 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 AGNC Investment with a short position of Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and Annaly Capital.

Diversification Opportunities for AGNC Investment and Annaly Capital

0.87

Correlation Coefficient

AGNC Investment  Annaly Capital

Very poor diversification

The 3 months correlation between AGNC and Annaly is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management and AGNC Investment 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 AGNC Investment Corp are associated (or correlated) with Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of AGNC Investment i.e., AGNC Investment and Annaly Capital go up and down completely randomly.

Pair Corralation between AGNC Investment and Annaly Capital

Assuming the 90 days horizon AGNC Investment is expected to generate 1.36 times less return on investment than Annaly Capital. In addition to that, AGNC Investment is 1.05 times more volatile than Annaly Capital Management. It trades about 0.11 of its total potential returns per unit of risk. Annaly Capital Management is currently generating about 0.16 per unit of volatility. If you would invest  2,456  in Annaly Capital Management on June 2, 2024 and sell it today you would earn a total of  71.00  from holding Annaly Capital Management or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AGNC Investment Corp  vs.  Annaly Capital Management

AGNC Investment Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGNC Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Annaly Capital Management

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Annaly Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AGNC Investment and Annaly Capital

The main advantage of trading using opposite AGNC Investment and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment position performs unexpectedly, Annaly Capital 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.

The idea behind AGNC Investment Corp and Annaly Capital Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.