Correlation Between AGNC Investment and AvalonBay Communities

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Can any of the company-specific risk be diversified away by investing in both AGNC Investment and AvalonBay Communities 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 AvalonBay Communities 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 AvalonBay Communities, you can compare the effects of market volatilities on AGNC Investment and AvalonBay Communities 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 AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and AvalonBay Communities.

Diversification Opportunities for AGNC Investment and AvalonBay Communities

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between AGNC and AvalonBay is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities 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 AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of AGNC Investment i.e., AGNC Investment and AvalonBay Communities go up and down completely randomly.

Pair Corralation between AGNC Investment and AvalonBay Communities

Given the investment horizon of 90 days AGNC Investment Corp is expected to generate 1.39 times more return on investment than AvalonBay Communities. However, AGNC Investment is 1.39 times more volatile than AvalonBay Communities. It trades about 0.04 of its potential returns per unit of risk. AvalonBay Communities is currently generating about 0.05 per unit of risk. If you would invest  870.00  in AGNC Investment Corp on December 30, 2023 and sell it today you would earn a total of  120.00  from holding AGNC Investment Corp or generate 13.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

AGNC Investment Corp  vs.  AvalonBay Communities

 Performance 
       Timeline  
AGNC Investment Corp 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, AGNC Investment may actually be approaching a critical reversion point that can send shares even higher in April 2024.
AvalonBay Communities 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days AvalonBay Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AvalonBay Communities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

AGNC Investment and AvalonBay Communities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AGNC Investment and AvalonBay Communities

The main advantage of trading using opposite AGNC Investment and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.
The idea behind AGNC Investment Corp and AvalonBay Communities 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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