Correlation Between AGNC Investment and BRT Realty
Can any of the company-specific risk be diversified away by investing in both AGNC Investment and BRT Realty 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 BRT Realty 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 BRT Realty Trust, you can compare the effects of market volatilities on AGNC Investment and BRT Realty 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 BRT Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGNC Investment and BRT Realty.
Diversification Opportunities for AGNC Investment and BRT Realty
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AGNC and BRT is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and BRT Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRT Realty Trust 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 BRT Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRT Realty Trust has no effect on the direction of AGNC Investment i.e., AGNC Investment and BRT Realty go up and down completely randomly.
Pair Corralation between AGNC Investment and BRT Realty
Given the investment horizon of 90 days AGNC Investment Corp is expected to under-perform the BRT Realty. But the stock apears to be less risky and, when comparing its historical volatility, AGNC Investment Corp is 1.7 times less risky than BRT Realty. The stock trades about -0.08 of its potential returns per unit of risk. The BRT Realty Trust is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,581 in BRT Realty Trust on January 26, 2024 and sell it today you would earn a total of 183.00 from holding BRT Realty Trust or generate 11.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
AGNC Investment Corp vs. BRT Realty Trust
Performance |
Timeline |
AGNC Investment Corp |
BRT Realty Trust |
AGNC Investment and BRT Realty Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AGNC Investment and BRT Realty
The main advantage of trading using opposite AGNC Investment and BRT Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment position performs unexpectedly, BRT Realty 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 BRT Realty will offset losses from the drop in BRT Realty's long position.The idea behind AGNC Investment Corp and BRT Realty Trust 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.BRT Realty vs. Nexpoint Residential Trust | BRT Realty vs. Centerspace | BRT Realty vs. Veris Residential | BRT Realty vs. Apartment Income REIT |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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