Correlation Between DHI and AG Mortgage

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

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

Diversification Opportunities for DHI and AG Mortgage

0.24

Correlation Coefficient

DHI  AG Mortgage

Modest diversification

The 3 months correlation between DHI and MITN is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding DHI Group 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 DHI 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 DHI Group 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 DHI i.e., DHI and AG Mortgage go up and down completely randomly.

Pair Corralation between DHI and AG Mortgage

Considering the 90-day investment horizon DHI Group is expected to generate 20.76 times more return on investment than AG Mortgage. However, DHI is 20.76 times more volatile than AG Mortgage Investment. It trades about 0.18 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.21 per unit of risk. If you would invest  179.00  in DHI Group on October 10, 2024 and sell it today you would earn a total of  29.00  from holding DHI Group or generate 16.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

DHI Group  vs.  AG Mortgage Investment

DHI Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DHI Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, DHI showed solid returns over the last few months and may actually be approaching a breakup point.

AG Mortgage Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DHI and AG Mortgage

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.