Correlation Between AGNC Investment and Two Harbors

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

Diversification Opportunities for AGNC Investment and Two Harbors

0.67

Correlation Coefficient

AGNC Investment  Two Harbors

Poor diversification

The 3 months correlation between AGNC and Two is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp and Two Harbors Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investments 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 Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investments has no effect on the direction of AGNC Investment i.e., AGNC Investment and Two Harbors go up and down completely randomly.

Pair Corralation between AGNC Investment and Two Harbors

Given the investment horizon of 90 days AGNC Investment Corp is expected to under-perform the Two Harbors. But the stock apears to be less risky and, when comparing its historical volatility, AGNC Investment Corp is 1.3 times less risky than Two Harbors. The stock trades about -0.16 of its potential returns per unit of risk. The Two Harbors Investments is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,275  in Two Harbors Investments on January 30, 2024 and sell it today you would lose (22.00) from holding Two Harbors Investments or give up 1.73% of portfolio value over 90 days.

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

AGNC Investment Corp  vs.  Two Harbors Investments

AGNC Investment Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGNC Investment Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AGNC Investment is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Two Harbors Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Two Harbors is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AGNC Investment and Two Harbors

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

The idea behind AGNC Investment Corp and Two Harbors Investments 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.