Correlation Between MFA Financial and Patria Investments

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

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

Diversification Opportunities for MFA Financial and Patria Investments

-0.53

Correlation Coefficient

MFA Financial  Patria Investments

Excellent diversification

The 3 months correlation between MFA and Patria is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding MFA Financial and Patria Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patria Investments and MFA 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 MFA Financial are associated (or correlated) with Patria Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patria Investments has no effect on the direction of MFA Financial i.e., MFA Financial and Patria Investments go up and down completely randomly.

Pair Corralation between MFA Financial and Patria Investments

Considering the 90-day investment horizon MFA Financial is expected to under-perform the Patria Investments. But the stock apears to be less risky and, when comparing its historical volatility, MFA Financial is 1.2 times less risky than Patria Investments. The stock trades about -0.06 of its potential returns per unit of risk. The Patria Investments is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,116  in Patria Investments on July 18, 2024 and sell it today you would earn a total of  8.00  from holding Patria Investments or generate 0.72% return on investment over 90 days.

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

MFA Financial  vs.  Patria Investments

MFA Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MFA Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, MFA Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Patria Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Patria Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with MFA Financial and Patria Investments

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

The idea behind MFA Financial and Patria Investments 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.