Correlation Between Victory Capital and Two Harbors

Can any of the company-specific risk be diversified away by investing in both Victory 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 Victory 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 Victory Capital Holdings and Two Harbors Investments, you can compare the effects of market volatilities on Victory 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 Victory Capital with a short position of Two Harbors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Capital and Two Harbors.

Diversification Opportunities for Victory Capital and Two Harbors

-0.7

Correlation Coefficient

Victory Capital  Two Harbors

Excellent diversification

The 3 months correlation between Victory and Two is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Victory Capital Holdings and Two Harbors Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Harbors Investments and Victory 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 Victory Capital Holdings 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 Investments has no effect on the direction of Victory Capital i.e., Victory Capital and Two Harbors go up and down completely randomly.

Pair Corralation between Victory Capital and Two Harbors

Given the investment horizon of 90 days Victory Capital Holdings is expected to generate 1.03 times more return on investment than Two Harbors. However, Victory Capital is 1.03 times more volatile than Two Harbors Investments. It trades about 0.1 of its potential returns per unit of risk. Two Harbors Investments is currently generating about 0.0 per unit of risk. If you would invest  2,687  in Victory Capital Holdings on August 15, 2024 and sell it today you would earn a total of  3,650  from holding Victory Capital Holdings or generate 135.84% return on investment over 90 days.

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

Victory Capital Holdings  vs.  Two Harbors Investments

Victory Capital Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Capital Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Victory Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Two Harbors Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Two Harbors Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Victory Capital and Two Harbors

The main advantage of trading using opposite Victory Capital and Two Harbors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory 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 Victory Capital Holdings and Two Harbors 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.