Correlation Between Annaly Capital and AGNC Investment

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Can any of the company-specific risk be diversified away by investing in both Annaly Capital and AGNC Investment 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 Annaly Capital and AGNC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management and AGNC Investment Corp, you can compare the effects of market volatilities on Annaly Capital and AGNC Investment 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 Annaly Capital with a short position of AGNC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and AGNC Investment.

Diversification Opportunities for Annaly Capital and AGNC Investment

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Annaly and AGNC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and AGNC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC Investment Corp and Annaly Capital 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 Annaly Capital Management are associated (or correlated) with AGNC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC Investment Corp has no effect on the direction of Annaly Capital i.e., Annaly Capital and AGNC Investment go up and down completely randomly.

Pair Corralation between Annaly Capital and AGNC Investment

Assuming the 90 days trading horizon Annaly Capital is expected to generate 1.24 times less return on investment than AGNC Investment. In addition to that, Annaly Capital is 2.0 times more volatile than AGNC Investment Corp. It trades about 0.16 of its total potential returns per unit of risk. AGNC Investment Corp is currently generating about 0.4 per unit of volatility. If you would invest  2,460  in AGNC Investment Corp on April 14, 2024 and sell it today you would earn a total of  28.00  from holding AGNC Investment Corp or generate 1.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Annaly Capital Management  vs.  AGNC Investment Corp

 Performance 
       Timeline  
Annaly Capital Management 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 22 (%) 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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.
AGNC Investment Corp 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 21 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

Annaly Capital and AGNC Investment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Annaly Capital and AGNC Investment

The main advantage of trading using opposite Annaly Capital and AGNC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital position performs unexpectedly, AGNC Investment 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 AGNC Investment will offset losses from the drop in AGNC Investment's long position.
The idea behind Annaly Capital Management and AGNC Investment Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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