Correlation Between Lument Finance and AG Mortgage

Can any of the company-specific risk be diversified away by investing in both Lument Finance 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 Lument Finance and AG Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lument Finance Trust and AG Mortgage Investment, you can compare the effects of market volatilities on Lument Finance 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 Lument Finance with a short position of AG Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and AG Mortgage.

Diversification Opportunities for Lument Finance and AG Mortgage

0.75

Correlation Coefficient

Lument Finance  AG Mortgage

Poor diversification

The 3 months correlation between Lument and MITT-PC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust 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 Lument Finance 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 Lument Finance Trust 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 Lument Finance i.e., Lument Finance and AG Mortgage go up and down completely randomly.

Pair Corralation between Lument Finance and AG Mortgage

Considering the 90-day investment horizon Lument Finance Trust is expected to generate 5.23 times more return on investment than AG Mortgage. However, Lument Finance is 5.23 times more volatile than AG Mortgage Investment. It trades about 0.17 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.22 per unit of risk. If you would invest  258.00  in Lument Finance Trust on September 27, 2024 and sell it today you would earn a total of  16.00  from holding Lument Finance Trust or generate 6.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Lument Finance Trust  vs.  AG Mortgage Investment

Lument Finance Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Lument Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AG Mortgage Investment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, AG Mortgage is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lument Finance and AG Mortgage

The main advantage of trading using opposite Lument Finance and AG Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lument Finance 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.

The idea behind Lument Finance Trust and AG Mortgage Investment 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.