Correlation Between Lument Finance and Claros Mortgage

Can any of the company-specific risk be diversified away by investing in both Lument Finance and Claros 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 Lument Finance and Claros Mortgage 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 Claros Mortgage Trust, you can compare the effects of market volatilities on Lument Finance and Claros 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 Lument Finance with a short position of Claros Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lument Finance and Claros Mortgage.

Diversification Opportunities for Lument Finance and Claros Mortgage

-0.44

Correlation Coefficient

Lument Finance  Claros Mortgage

Very good diversification

The 3 months correlation between Lument and Claros is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and Claros Mortgage Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Claros Mortgage Trust 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 Claros Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Claros Mortgage Trust has no effect on the direction of Lument Finance i.e., Lument Finance and Claros Mortgage go up and down completely randomly.

Pair Corralation between Lument Finance and Claros Mortgage

Considering the 90-day investment horizon Lument Finance Trust is expected to generate 0.3 times more return on investment than Claros Mortgage. However, Lument Finance Trust is 3.37 times less risky than Claros Mortgage. It trades about 0.09 of its potential returns per unit of risk. Claros Mortgage Trust is currently generating about 0.01 per unit of risk. If you would invest  256.00  in Lument Finance Trust on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Lument Finance Trust or generate 8.2% return on investment over 90 days.

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

Lument Finance Trust  vs.  Claros Mortgage Trust

Lument Finance Trust

Risk-Adjusted Performance

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. In spite of comparatively weak technical and fundamental indicators, Lument Finance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Claros Mortgage Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Claros Mortgage Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Claros Mortgage is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lument Finance and Claros Mortgage

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

The idea behind Lument Finance Trust and Claros Mortgage Trust 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.