Correlation Between AG Mortgage and First Community

Can any of the company-specific risk be diversified away by investing in both AG Mortgage and First Community 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 AG Mortgage and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for AG Mortgage and First Community

0.69

Correlation Coefficient

AG Mortgage  First Community

Poor diversification

The 3 months correlation between MITN and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and AG Mortgage 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 AG Mortgage Investment are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of AG Mortgage i.e., AG Mortgage and First Community go up and down completely randomly.

Pair Corralation between AG Mortgage and First Community

Given the investment horizon of 90 days AG Mortgage is expected to generate 1.18 times less return on investment than First Community. But when comparing it to its historical volatility, AG Mortgage Investment is 4.78 times less risky than First Community. It trades about 0.12 of its potential returns per unit of risk. First Community is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  825.00  in First Community on October 11, 2024 and sell it today you would earn a total of  115.00  from holding First Community or generate 13.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	57.07%
Values	Daily Returns

AG Mortgage Investment  vs.  First Community

AG Mortgage Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Community

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Community is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AG Mortgage and First Community

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

The idea behind AG Mortgage Investment and First Community 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.