Correlation Between Sachem Capital and Two Harbors

Can any of the company-specific risk be diversified away by investing in both Sachem Capital and Two Harbors 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 Sachem Capital and Two Harbors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sachem Capital Corp and Two Harbors Investment, you can compare the effects of market volatilities on Sachem Capital and Two Harbors 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 Sachem Capital with a short position of Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sachem Capital and Two Harbors.

Diversification Opportunities for Sachem Capital and Two Harbors

-0.14

Correlation Coefficient

Sachem Capital  Two Harbors

Good diversification

The 3 months correlation between Sachem and Two is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Sachem Capital Corp and Two Harbors Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investment and Sachem 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 Sachem Capital Corp are associated (or correlated) with Two Harbors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Harbors Investment has no effect on the direction of Sachem Capital i.e., Sachem Capital and Two Harbors go up and down completely randomly.

Pair Corralation between Sachem Capital and Two Harbors

Assuming the 90 days trading horizon Sachem Capital Corp is expected to generate 4.81 times more return on investment than Two Harbors. However, Sachem Capital is 4.81 times more volatile than Two Harbors Investment. It trades about 0.04 of its potential returns per unit of risk. Two Harbors Investment is currently generating about 0.12 per unit of risk. If you would invest  1,539  in Sachem Capital Corp on December 29, 2024 and sell it today you would earn a total of  73.00  from holding Sachem Capital Corp or generate 4.74% return on investment over 90 days.

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

Sachem Capital Corp  vs.  Two Harbors Investment

Sachem Capital Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sachem Capital Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Sachem Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Two Harbors Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Two Harbors Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Two Harbors is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sachem Capital and Two Harbors

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

The idea behind Sachem Capital Corp and Two Harbors Investment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.