Correlation Between Granite Point and New York

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

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

Diversification Opportunities for Granite Point and New York

0.78

Correlation Coefficient

Granite Point  New York

Poor diversification

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

Pair Corralation between Granite Point and New York

Assuming the 90 days trading horizon Granite Point Mortgage is expected to generate 3.03 times more return on investment than New York. However, Granite Point is 3.03 times more volatile than New York Mortgage. It trades about 0.23 of its potential returns per unit of risk. New York Mortgage is currently generating about 0.26 per unit of risk. If you would invest  1,531  in Granite Point Mortgage on September 2, 2024 and sell it today you would earn a total of  282.00  from holding Granite Point Mortgage or generate 18.42% return on investment over 90 days.

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

Granite Point Mortgage  vs.  New York Mortgage

Granite Point Mortgage

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Point Mortgage are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Granite Point sustained solid returns over the last few months and may actually be approaching a breakup point.

New York Mortgage

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New York Mortgage are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, New York may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Granite Point and New York

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

The idea behind Granite Point Mortgage and New York Mortgage 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.