Correlation Between Annaly Capital and New York

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

Diversification Opportunities for Annaly Capital and New York

0.62

Correlation Coefficient

Annaly Capital  New York

Poor diversification

The 3 months correlation between Annaly and New is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Annaly Capital i.e., Annaly Capital and New York go up and down completely randomly.

Pair Corralation between Annaly Capital and New York

Considering the 90-day investment horizon Annaly Capital is expected to generate 1.92 times less return on investment than New York. But when comparing it to its historical volatility, Annaly Capital Management is 2.09 times less risky than New York. It trades about 0.4 of its potential returns per unit of risk. New York Mortgage is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  599.00  in New York Mortgage on November 29, 2024 and sell it today you would earn a total of  104.00  from holding New York Mortgage or generate 17.36% 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.  New York Mortgage

Annaly Capital Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Annaly Capital showed solid returns over the last few months and may actually be approaching a breakup point.

New York Mortgage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New York Mortgage are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating primary indicators, New York unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Annaly Capital and New York

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

The idea behind Annaly Capital Management and New York 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.