Correlation Between Annaly Capital and Two Harbors
Can any of the company-specific risk be diversified away by investing in both Annaly Capital 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 Annaly Capital and Two Harbors 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 Two Harbors Investments, you can compare the effects of market volatilities on Annaly Capital 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 Annaly Capital with a short position of Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and Two Harbors.
Diversification Opportunities for Annaly Capital and Two Harbors
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Annaly and Two is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management 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 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 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 Annaly Capital i.e., Annaly Capital and Two Harbors go up and down completely randomly.
Pair Corralation between Annaly Capital and Two Harbors
Considering the 90-day investment horizon Annaly Capital Management is expected to generate 0.73 times more return on investment than Two Harbors. However, Annaly Capital Management is 1.37 times less risky than Two Harbors. It trades about 0.11 of its potential returns per unit of risk. Two Harbors Investments is currently generating about 0.07 per unit of risk. If you would invest 1,595 in Annaly Capital Management on February 15, 2024 and sell it today you would earn a total of 421.00 from holding Annaly Capital Management or generate 26.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Annaly Capital Management vs. Two Harbors Investments
Performance |
Timeline |
Annaly Capital Management |
Two Harbors Investments |
Annaly Capital and Two Harbors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Annaly Capital and Two Harbors
The main advantage of trading using opposite Annaly Capital and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital 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.Annaly Capital vs. ARMOUR Residential REIT | Annaly Capital vs. Two Harbors Investments | Annaly Capital vs. Arbor Realty Trust | Annaly Capital vs. Chimera Investment |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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