Correlation Between Lument Finance and AGNC Investment

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

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

Diversification Opportunities for Lument Finance and AGNC Investment

0.74

Correlation Coefficient

Lument Finance  AGNC Investment

Poor diversification

The 3 months correlation between Lument and AGNC is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and AGNC Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGNC Investment Corp and Lument Finance 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 Lument Finance Trust are associated (or correlated) with AGNC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGNC Investment Corp has no effect on the direction of Lument Finance i.e., Lument Finance and AGNC Investment go up and down completely randomly.

Pair Corralation between Lument Finance and AGNC Investment

Assuming the 90 days trading horizon Lument Finance Trust is expected to generate 2.67 times more return on investment than AGNC Investment. However, Lument Finance is 2.67 times more volatile than AGNC Investment Corp. It trades about 0.22 of its potential returns per unit of risk. AGNC Investment Corp is currently generating about 0.22 per unit of risk. If you would invest  2,265  in Lument Finance Trust on September 28, 2024 and sell it today you would earn a total of  65.00  from holding Lument Finance Trust or generate 2.87% return on investment over 90 days.

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

Lument Finance Trust  vs.  AGNC Investment Corp

Lument Finance Trust

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lument Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AGNC Investment Corp

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGNC Investment is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lument Finance and AGNC Investment

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

The idea behind Lument Finance Trust and AGNC Investment Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.