Correlation Between Annaly Capital and AGNC Investment

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

Diversification Opportunities for Annaly Capital and AGNC Investment

0.68

Correlation Coefficient

Annaly Capital  AGNC Investment

Poor diversification

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

Pair Corralation between Annaly Capital and AGNC Investment

Assuming the 90 days trading horizon Annaly Capital is expected to generate 3.31 times less return on investment than AGNC Investment. But when comparing it to its historical volatility, Annaly Capital Management is 1.43 times less risky than AGNC Investment. It trades about 0.09 of its potential returns per unit of risk. AGNC Investment Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,369  in AGNC Investment Corp on September 2, 2024 and sell it today you would earn a total of  153.00  from holding AGNC Investment Corp or generate 6.46% return on investment over 90 days.

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

Annaly Capital Management  vs.  AGNC Investment Corp

Annaly Capital Management

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Annaly Capital is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

AGNC Investment Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AGNC Investment Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, AGNC Investment 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 Annaly Capital and AGNC Investment

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

The idea behind Annaly Capital Management and AGNC Investment Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..