Correlation Between Annaly Capital and Cherry Hill

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Can any of the company-specific risk be diversified away by investing in both Annaly Capital and Cherry Hill 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 Annaly Capital and Cherry Hill into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management and Cherry Hill Mortgage, you can compare the effects of market volatilities on Annaly Capital and Cherry Hill 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 Annaly Capital with a short position of Cherry Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and Cherry Hill.

Diversification Opportunities for Annaly Capital and Cherry Hill

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Annaly and Cherry is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage and Annaly Capital 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 Annaly Capital Management are associated (or correlated) with Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Annaly Capital i.e., Annaly Capital and Cherry Hill go up and down completely randomly.

Pair Corralation between Annaly Capital and Cherry Hill

Assuming the 90 days trading horizon Annaly Capital Management is expected to generate 0.16 times more return on investment than Cherry Hill. However, Annaly Capital Management is 6.25 times less risky than Cherry Hill. It trades about 0.11 of its potential returns per unit of risk. Cherry Hill Mortgage is currently generating about -0.19 per unit of risk. If you would invest  2,479  in Annaly Capital Management on September 5, 2024 and sell it today you would earn a total of  55.00  from holding Annaly Capital Management or generate 2.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Annaly Capital Management  vs.  Cherry Hill Mortgage

 Performance 
       Timeline  
Annaly Capital Management 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Annaly Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Cherry Hill Mortgage 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Annaly Capital and Cherry Hill Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Annaly Capital and Cherry Hill

The main advantage of trading using opposite Annaly Capital and Cherry Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital position performs unexpectedly, Cherry Hill 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 Cherry Hill will offset losses from the drop in Cherry Hill's long position.
The idea behind Annaly Capital Management and Cherry Hill 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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