Correlation Between TPG RE and Invesco Mortgage

Can any of the company-specific risk be diversified away by investing in both TPG RE and Invesco Mortgage 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 TPG RE and Invesco Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TPG RE Finance and Invesco Mortgage Capital, you can compare the effects of market volatilities on TPG RE and Invesco Mortgage 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 TPG RE with a short position of Invesco Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG RE and Invesco Mortgage.

Diversification Opportunities for TPG RE and Invesco Mortgage

0.43

Correlation Coefficient

TPG RE  Invesco Mortgage

Very weak diversification

The 3 months correlation between TPG and Invesco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance and Invesco Mortgage Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Mortgage Capital and TPG RE 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 TPG RE Finance are associated (or correlated) with Invesco Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Mortgage Capital has no effect on the direction of TPG RE i.e., TPG RE and Invesco Mortgage go up and down completely randomly.

Pair Corralation between TPG RE and Invesco Mortgage

Assuming the 90 days trading horizon TPG RE Finance is expected to generate 1.36 times more return on investment than Invesco Mortgage. However, TPG RE is 1.36 times more volatile than Invesco Mortgage Capital. It trades about 0.1 of its potential returns per unit of risk. Invesco Mortgage Capital is currently generating about 0.08 per unit of risk. If you would invest  1,817  in TPG RE Finance on September 3, 2024 and sell it today you would earn a total of  90.00  from holding TPG RE Finance or generate 4.95% return on investment over 90 days.

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

TPG RE Finance  vs.  Invesco Mortgage Capital

TPG RE Finance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TPG RE Finance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, TPG RE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Mortgage Capital

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with TPG RE and Invesco Mortgage

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

The idea behind TPG RE Finance and Invesco Mortgage Capital 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.