Correlation Between ARMOUR Residential and Presidio Property

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

By analyzing existing cross correlation between ARMOUR Residential REIT and Presidio Property Trust, you can compare the effects of market volatilities on ARMOUR Residential and Presidio Property 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 ARMOUR Residential with a short position of Presidio Property. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Presidio Property.

Diversification Opportunities for ARMOUR Residential and Presidio Property

-0.19

Correlation Coefficient

ARMOUR Residential  Presidio Property

Good diversification

The 3 months correlation between ARMOUR and Presidio is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT and Presidio Property Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Presidio Property Trust and ARMOUR Residential 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 ARMOUR Residential REIT are associated (or correlated) with Presidio Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Presidio Property Trust has no effect on the direction of ARMOUR Residential i.e., ARMOUR Residential and Presidio Property go up and down completely randomly.

Pair Corralation between ARMOUR Residential and Presidio Property

Assuming the 90 days trading horizon ARMOUR Residential is expected to generate 1.75 times less return on investment than Presidio Property. But when comparing it to its historical volatility, ARMOUR Residential REIT is 1.69 times less risky than Presidio Property. It trades about 0.28 of its potential returns per unit of risk. Presidio Property Trust is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,372  in Presidio Property Trust on October 24, 2024 and sell it today you would earn a total of  110.00  from holding Presidio Property Trust or generate 8.02% return on investment over 90 days.

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

ARMOUR Residential REIT  vs.  Presidio Property Trust

ARMOUR Residential REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Presidio Property Trust

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Presidio Property Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Presidio Property may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ARMOUR Residential and Presidio Property

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

The idea behind ARMOUR Residential REIT and Presidio Property 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.