Correlation Between AG Mortgage and Invesco Mortgage

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

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

Diversification Opportunities for AG Mortgage and Invesco Mortgage

0.78

Correlation Coefficient

AG Mortgage  Invesco Mortgage

Poor diversification

The 3 months correlation between MITT-PB and Invesco is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital and AG Mortgage 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 AG Mortgage Investment are associated (or correlated) with Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of AG Mortgage i.e., AG Mortgage and Invesco Mortgage go up and down completely randomly.

Pair Corralation between AG Mortgage and Invesco Mortgage

Assuming the 90 days trading horizon AG Mortgage Investment is expected to generate 0.69 times more return on investment than Invesco Mortgage. However, AG Mortgage Investment is 1.44 times less risky than Invesco Mortgage. It trades about 0.37 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.12 per unit of risk. If you would invest  1,989  in AG Mortgage Investment on June 16, 2024 and sell it today you would earn a total of  104.00  from holding AG Mortgage Investment or generate 5.23% return on investment over 90 days.

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

AG Mortgage Investment  vs.  Invesco Mortgage Capital

AG Mortgage Investment

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, AG Mortgage may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Invesco Mortgage Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Mortgage Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Invesco Mortgage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AG Mortgage and Invesco Mortgage

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

The idea behind AG Mortgage Investment and Invesco Mortgage Capital 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.