Correlation Between Lument Finance and Sachem Capital

Can any of the company-specific risk be diversified away by investing in both Lument Finance and Sachem Capital 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 Sachem Capital 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 Sachem Capital Corp, you can compare the effects of market volatilities on Lument Finance and Sachem Capital 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and Sachem Capital.

Diversification Opportunities for Lument Finance and Sachem Capital

-0.28

Correlation Coefficient

Lument Finance  Sachem Capital

Very good diversification

The 3 months correlation between Lument and Sachem is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Lument Finance i.e., Lument Finance and Sachem Capital go up and down completely randomly.

Pair Corralation between Lument Finance and Sachem Capital

Assuming the 90 days trading horizon Lument Finance Trust is expected to generate 2.4 times more return on investment than Sachem Capital. However, Lument Finance is 2.4 times more volatile than Sachem Capital Corp. It trades about 0.03 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.01 per unit of risk. If you would invest  2,044  in Lument Finance Trust on September 26, 2024 and sell it today you would earn a total of  286.00  from holding Lument Finance Trust or generate 13.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.18%
Values	Daily Returns

Lument Finance Trust  vs.  Sachem Capital Corp

Lument Finance Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lument Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lument Finance and Sachem Capital

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

The idea behind Lument Finance Trust and Sachem Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.