Correlation Between LendingClub Corp and Invesco Mortgage

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

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

Diversification Opportunities for LendingClub Corp and Invesco Mortgage

-0.63

Correlation Coefficient

LendingClub Corp  Invesco Mortgage

Excellent diversification

The 3 months correlation between LendingClub and Invesco is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital and LendingClub Corp 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 LendingClub Corp are associated (or correlated) with Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of LendingClub Corp i.e., LendingClub Corp and Invesco Mortgage go up and down completely randomly.

Pair Corralation between LendingClub Corp and Invesco Mortgage

Allowing for the 90-day total investment horizon LendingClub Corp is expected to under-perform the Invesco Mortgage. In addition to that, LendingClub Corp is 2.25 times more volatile than Invesco Mortgage Capital. It trades about -0.18 of its total potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.03 per unit of volatility. If you would invest  772.00  in Invesco Mortgage Capital on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Invesco Mortgage Capital or generate 2.72% return on investment over 90 days.

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

LendingClub Corp  vs.  Invesco Mortgage Capital

LendingClub Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LendingClub Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Invesco Mortgage Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Mortgage Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco Mortgage is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LendingClub Corp and Invesco Mortgage

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

The idea behind LendingClub Corp and Invesco Mortgage Capital 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.