Correlation Between MFA Financial and Granite Point

Can any of the company-specific risk be diversified away by investing in both MFA Financial and Granite Point 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 MFA Financial and Granite Point into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for MFA Financial and Granite Point

0.68

Correlation Coefficient

MFA Financial  Granite Point

Poor diversification

The 3 months correlation between MFA and Granite is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Granite Point Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Point Mortgage and MFA Financial 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 MFA Financial are associated (or correlated) with Granite Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Point Mortgage has no effect on the direction of MFA Financial i.e., MFA Financial and Granite Point go up and down completely randomly.

Pair Corralation between MFA Financial and Granite Point

Considering the 90-day investment horizon MFA Financial is expected to generate 0.65 times more return on investment than Granite Point. However, MFA Financial is 1.54 times less risky than Granite Point. It trades about 0.05 of its potential returns per unit of risk. Granite Point Mortgage is currently generating about -0.01 per unit of risk. If you would invest  724.00  in MFA Financial on December 2, 2024 and sell it today you would earn a total of  340.00  from holding MFA Financial or generate 46.96% return on investment over 90 days.

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

MFA Financial  vs.  Granite Point Mortgage

MFA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, MFA Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Granite Point Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Point Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MFA Financial and Granite Point

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

The idea behind MFA Financial and Granite Point Mortgage 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.