Correlation Between Two Harbors and AG Mortgage
Can any of the company-specific risk be diversified away by investing in both Two Harbors and AG Mortgage 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 AG Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Two Harbors Investment and AG Mortgage Investment, you can compare the effects of market volatilities on Two Harbors and AG Mortgage 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 AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and AG Mortgage.
Diversification Opportunities for Two Harbors and AG Mortgage
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Two and MITT-PB is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investment and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage Investment 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 Investment are associated (or correlated) with AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Two Harbors i.e., Two Harbors and AG Mortgage go up and down completely randomly.
Pair Corralation between Two Harbors and AG Mortgage
Assuming the 90 days trading horizon Two Harbors is expected to generate 1.23 times less return on investment than AG Mortgage. In addition to that, Two Harbors is 1.08 times more volatile than AG Mortgage Investment. It trades about 0.09 of its total potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.11 per unit of volatility. If you would invest 1,317 in AG Mortgage Investment on July 7, 2024 and sell it today you would earn a total of 908.00 from holding AG Mortgage Investment or generate 68.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Two Harbors Investment vs. AG Mortgage Investment
Performance |
Timeline |
Two Harbors Investment |
AG Mortgage Investment |
Two Harbors and AG Mortgage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Two Harbors and AG Mortgage
The main advantage of trading using opposite Two Harbors and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Two Harbors position performs unexpectedly, AG Mortgage 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 AG Mortgage will offset losses from the drop in AG Mortgage's long position.Two Harbors vs. Lument Finance Trust | Two Harbors vs. PennyMac Mortgage Investment | Two Harbors vs. AG Mortgage Investment | Two Harbors vs. Invesco Mortgage Capital |
AG Mortgage vs. Cherry Hill Mortgage | AG Mortgage vs. Chimera Investment | AG Mortgage vs. PennyMac Mortgage Investment | AG Mortgage vs. Lument Finance 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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