Correlation Between Stifel Financial and ARMOUR Residential

Can any of the company-specific risk be diversified away by investing in both Stifel Financial and ARMOUR Residential 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 Stifel Financial and ARMOUR Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stifel Financial and ARMOUR Residential REIT, you can compare the effects of market volatilities on Stifel Financial and ARMOUR Residential 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 Stifel Financial with a short position of ARMOUR Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stifel Financial and ARMOUR Residential.

Diversification Opportunities for Stifel Financial and ARMOUR Residential

0.06

Correlation Coefficient

Stifel Financial  ARMOUR Residential

Significant diversification

The 3 months correlation between Stifel and ARMOUR is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Stifel Financial and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and Stifel Financial 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 Stifel Financial are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of Stifel Financial i.e., Stifel Financial and ARMOUR Residential go up and down completely randomly.

Pair Corralation between Stifel Financial and ARMOUR Residential

Allowing for the 90-day total investment horizon Stifel Financial is expected to under-perform the ARMOUR Residential. In addition to that, Stifel Financial is 1.64 times more volatile than ARMOUR Residential REIT. It trades about -0.07 of its total potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.06 per unit of volatility. If you would invest  1,840  in ARMOUR Residential REIT on December 1, 2024 and sell it today you would earn a total of  65.00  from holding ARMOUR Residential REIT or generate 3.53% return on investment over 90 days.

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

Stifel Financial  vs.  ARMOUR Residential REIT

Stifel Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stifel Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ARMOUR Residential REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARMOUR Residential REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, ARMOUR Residential is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Stifel Financial and ARMOUR Residential

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

The idea behind Stifel Financial and ARMOUR Residential REIT 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 CEOs Directory module to screen CEOs from public companies around the world.