Correlation Between Cherry Hill and TPG RE

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

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

Diversification Opportunities for Cherry Hill and TPG RE

-0.67

Correlation Coefficient

Cherry Hill  TPG RE

Excellent diversification

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

Pair Corralation between Cherry Hill and TPG RE

Given the investment horizon of 90 days Cherry Hill Mortgage is expected to under-perform the TPG RE. In addition to that, Cherry Hill is 1.23 times more volatile than TPG RE Finance. It trades about -0.19 of its total potential returns per unit of risk. TPG RE Finance is currently generating about 0.06 per unit of volatility. If you would invest  859.00  in TPG RE Finance on September 5, 2024 and sell it today you would earn a total of  45.00  from holding TPG RE Finance or generate 5.24% return on investment over 90 days.

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

Cherry Hill Mortgage  vs.  TPG RE Finance

Cherry Hill Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

TPG RE Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TPG RE Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, TPG RE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cherry Hill and TPG RE

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

The idea behind Cherry Hill Mortgage and TPG RE Finance 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.