Correlation Between Claros Mortgage and Lument Finance

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

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

Diversification Opportunities for Claros Mortgage and Lument Finance

-0.26

Correlation Coefficient

Claros Mortgage  Lument Finance

Very good diversification

The 3 months correlation between Claros and Lument is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Claros Mortgage Trust and Lument Finance Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lument Finance Trust and Claros 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 Claros Mortgage Trust are associated (or correlated) with Lument Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lument Finance Trust has no effect on the direction of Claros Mortgage i.e., Claros Mortgage and Lument Finance go up and down completely randomly.

Pair Corralation between Claros Mortgage and Lument Finance

Given the investment horizon of 90 days Claros Mortgage Trust is expected to under-perform the Lument Finance. In addition to that, Claros Mortgage is 1.49 times more volatile than Lument Finance Trust. It trades about -0.05 of its total potential returns per unit of risk. Lument Finance Trust is currently generating about 0.08 per unit of volatility. If you would invest  239.00  in Lument Finance Trust on September 3, 2024 and sell it today you would earn a total of  25.00  from holding Lument Finance Trust or generate 10.46% return on investment over 90 days.

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

Claros Mortgage Trust  vs.  Lument Finance Trust

Claros Mortgage Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Claros Mortgage Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lument Finance Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Lument Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Claros Mortgage and Lument Finance

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

The idea behind Claros Mortgage Trust and Lument Finance 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.