Correlation Between Lument Finance and Broadmark Realty

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

Diversification Opportunities for Lument Finance and Broadmark Realty

0.0

Correlation Coefficient

Lument Finance  Broadmark Realty

Pay attention - limited upside

The 3 months correlation between Lument and Broadmark is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and Broadmark Realty Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadmark Realty Capital 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 Broadmark Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadmark Realty Capital has no effect on the direction of Lument Finance i.e., Lument Finance and Broadmark Realty go up and down completely randomly.

Pair Corralation between Lument Finance and Broadmark Realty

If you would invest  256.00  in Lument Finance Trust on December 29, 2024 and sell it today you would earn a total of  12.00  from holding Lument Finance Trust or generate 4.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lument Finance Trust  vs.  Broadmark Realty Capital

Lument Finance Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Lument Finance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Broadmark Realty Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Broadmark Realty Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Broadmark Realty is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lument Finance and Broadmark Realty

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

The idea behind Lument Finance Trust and Broadmark Realty 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.