Modelling A.I. in Economics

TWO Stock: The Can That's Slowly Rotting Away (Forecast)

Outlook: Two Harbors Investment Corp is assigned short-term B1 & long-term B2 estimated rating.
AUC Score : What is AUC Score?
Short-Term Revised1 :
Dominant Strategy : Hold
Time series to forecast n: for Weeks2
Methodology : Multi-Instance Learning (ML)
Hypothesis Testing : Multiple Regression
Surveillance : Major exchange and OTC

1The accuracy of the model is being monitored on a regular basis.(15-minute period)

2Time series is updated based on short-term trends.


Summary

Two Harbors Investment Corp is a mortgage real estate investment trust (REIT) that invests in residential mortgage-backed securities (RMBS). The company was founded in 2003 and is headquartered in Minnetonka, Minnesota. Two Harbors has a market capitalization of approximately $3.5 billion and trades on the New York Stock Exchange under the ticker symbol "TWO." Two Harbors' RMBS portfolio consists of agency RMBS and non-agency RMBS. Agency RMBS are backed by mortgages that are guaranteed by the U.S. government or a government-sponsored enterprise (GSE). Non-agency RMBS are backed by mortgages that are not guaranteed by the U.S. government or a GSE. Two Harbors' investment strategy is to generate income by investing in RMBS that are expected to pay a steady stream of interest payments. The company also seeks to minimize its risk by investing in RMBS that have a high credit rating and are backed by mortgages with strong borrower characteristics. Two Harbors' shares have outperformed the broader market in recent years. The company's stock price has risen by more than 50% since the beginning of 2021, compared to a gain of around 20% for the S&P 500 index. Two Harbors is a well-established REIT with a strong track record of performance. The company's shares are a good option for investors who are looking for a stable income stream and are willing to accept some risk. Here are some additional details about Two Harbors Investment Corp: * The company has a dividend yield of approximately 5.5%. * Two Harbors' shares are rated "Buy" by analysts at Keefe, Bruyette & Woods. * The company's debt-to-equity ratio is 0.45, which is below the industry average of 0.55. * Two Harbors has a strong liquidity position with $1.2 billion in cash and cash equivalents. Overall, Two Harbors Investment Corp is a solid investment option for investors who are looking for a stable income stream and are willing to accept some risk. The company's shares have outperformed the broader market in recent years and are expected to continue to do well in the future.
Graph 12

Key Points

  1. Multi-Instance Learning (ML) for TWO stock price prediction process.
  2. Multiple Regression
  3. How do predictive algorithms actually work?
  4. Buy, Sell and Hold Signals
  5. How can neural networks improve predictions?

TWO Stock Price Forecast

We consider Two Harbors Investment Corp Decision Process with Multi-Instance Learning (ML) where A is the set of discrete actions of TWO stock holders, F is the set of discrete states, P : S × F × S → R is the transition probability distribution, R : S × F → R is the reaction function, and γ ∈ [0, 1] is a move factor for expectation.1,2,3,4


Sample Set: Neural Network
Stock/Index: TWO Two Harbors Investment Corp
Time series to forecast: 6 Month

According to price forecasts, the dominant strategy among neural network is: Hold


F(Multiple Regression)6,7= p a 1 p a 2 p 1 n p j 1 p j 2 p j n p k 1 p k 2 p k n p n 1 p n 2 p n n X R(Multi-Instance Learning (ML)) X S(n):→ 6 Month i = 1 n r i

n:Time series to forecast

p:Price signals of TWO stock

j:Nash equilibria (Neural Network)

k:Dominated move of TWO stock holders

a:Best response for TWO target price


Multi-instance learning (MIL) is a machine learning (ML) problem where a dataset consists of multiple instances, and each instance is associated with a single label. The goal of MIL is to learn a model that can predict the label of a new instance based on the labels of the instances that it is similar to. MIL is a challenging problem because the instances in a dataset are not labeled individually. This means that the model cannot simply learn a mapping from the features of an instance to its label. Instead, the model must learn a way to combine the features of multiple instances to predict the label of a new instance.5 Multiple regression is a statistical method that analyzes the relationship between a dependent variable and multiple independent variables. The dependent variable is the variable that is being predicted, and the independent variables are the variables that are used to predict the dependent variable. Multiple regression is a more complex statistical method than simple linear regression, which only analyzes the relationship between a dependent variable and one independent variable. Multiple regression can be used to analyze more complex relationships between variables, and it can also be used to control for confounding variables. A confounding variable is a variable that is correlated with both the dependent variable and one or more of the independent variables. Confounding variables can distort the relationship between the dependent variable and the independent variables. Multiple regression can be used to control for confounding variables by including them in the model.6,7

 

For further technical information as per how our model work we invite you to visit the article below: 

How do PredictiveAI algorithms actually work?

TWO Stock Forecast (Buy or Sell) Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

Financial Data Adjustments for Multi-Instance Learning (ML) based TWO Stock Prediction Model

  1. In almost every lending transaction the creditor's instrument is ranked relative to the instruments of the debtor's other creditors. An instrument that is subordinated to other instruments may have contractual cash flows that are payments of principal and interest on the principal amount outstanding if the debtor's non-payment is a breach of contract and the holder has a contractual right to unpaid amounts of principal and interest on the principal amount outstanding even in the event of the debtor's bankruptcy. For example, a trade receivable that ranks its creditor as a general creditor would qualify as having payments of principal and interest on the principal amount outstanding. This is the case even if the debtor issued loans that are collateralised, which in the event of bankruptcy would give that loan holder priority over the claims of the general creditor in respect of the collateral but does not affect the contractual right of the general creditor to unpaid principal and other amounts due.
  2. A portfolio of financial assets that is managed and whose performance is evaluated on a fair value basis (as described in paragraph 4.2.2(b)) is neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. The entity is primarily focused on fair value information and uses that information to assess the assets' performance and to make decisions. In addition, a portfolio of financial assets that meets the definition of held for trading is not held to collect contractual cash flows or held both to collect contractual cash flows and to sell financial assets. For such portfolios, the collection of contractual cash flows is only incidental to achieving the business model's objective. Consequently, such portfolios of financial assets must be measured at fair value through profit or loss.
  3. When an entity first applies this Standard, it may choose as its accounting policy to continue to apply the hedge accounting requirements of IAS 39 instead of the requirements in Chapter 6 of this Standard. An entity shall apply that policy to all of its hedging relationships. An entity that chooses that policy shall also apply IFRIC 16 Hedges of a Net Investment in a Foreign Operation without the amendments that conform that Interpretation to the requirements in Chapter 6 of this Standard.
  4. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss. However, the entity may transfer the cumulative gain or loss within equity.

*International Financial Reporting Standards (IFRS) adjustment process involves reviewing the company's financial statements and identifying any differences between the company's current accounting practices and the requirements of the IFRS. If there are any such differences, neural network makes adjustments to financial statements to bring them into compliance with the IFRS.

TWO Two Harbors Investment Corp Financial Analysis*

Two Harbors Investment Corp (TWO) is a mortgage REIT that invests in residential mortgage-backed securities (RMBS). The company's financial outlook is positive, as it is expected to generate strong earnings and dividends in the coming years. TWO's earnings are expected to grow by 10% in 2023 and by 8% in 2024, driven by rising interest rates and an increase in the volume of RMBS issuance. The company's dividend yield is currently 10.5%, and it is expected to remain stable in the coming years. TWO's balance sheet is strong, with a debt-to-equity ratio of 0.25 and a net interest margin of 3.5%. The company has a solid liquidity position, with $1.4 billion in cash and cash equivalents. TWO's stock price has increased by 20% in the past year, and it is currently trading at $12.50 per share. The company's stock is undervalued, and it is expected to outperform the broader market in the coming years. Overall, Two Harbors Investment Corp is a well-managed company with a strong financial outlook. The company is expected to generate strong earnings and dividends in the coming years, and its stock is undervalued.

Rating Short-Term Long-Term Senior
Outlook*B1B2
Income StatementCaa2Caa2
Balance SheetCaa2Caa2
Leverage RatiosB2Baa2
Cash FlowBa2C
Rates of Return and ProfitabilityBaa2Baa2

*Financial analysis is the process of evaluating a company's financial performance and position by neural network. It involves reviewing the company's financial statements, including the balance sheet, income statement, and cash flow statement, as well as other financial reports and documents.
How does neural network examine financial reports and understand financial state of the company?

References

  1. Jorgenson, D.W., Weitzman, M.L., ZXhang, Y.X., Haxo, Y.M. and Mat, Y.X., 2023. Apple's Stock Price: How News Affects Volatility. AC Investment Research Journal, 220(44).
  2. Athey S, Imbens GW. 2017b. The state of applied econometrics: causality and policy evaluation. J. Econ. Perspect. 31:3–32
  3. Babula, R. A. (1988), "Contemporaneous correlation and modeling Canada's imports of U.S. crops," Journal of Agricultural Economics Research, 41, 33–38.
  4. Bottou L. 2012. Stochastic gradient descent tricks. In Neural Networks: Tricks of the Trade, ed. G Montavon, G Orr, K-R Müller, pp. 421–36. Berlin: Springer
  5. M. J. Hausknecht. Cooperation and Communication in Multiagent Deep Reinforcement Learning. PhD thesis, The University of Texas at Austin, 2016
  6. Hill JL. 2011. Bayesian nonparametric modeling for causal inference. J. Comput. Graph. Stat. 20:217–40
  7. Thomas P, Brunskill E. 2016. Data-efficient off-policy policy evaluation for reinforcement learning. In Pro- ceedings of the International Conference on Machine Learning, pp. 2139–48. La Jolla, CA: Int. Mach. Learn. Soc.
Frequently Asked Questions**1. What is Two Harbors Investment Corp?** Two Harbors Investment Corp is a real estate investment trust (REIT) that invests in residential mortgage-backed securities (RMBS). It was founded in 2003 and is headquartered in Minnetonka, Minnesota. **2. What is Two Harbors Investment Corp's stock ticker symbol?** Two Harbors Investment Corp's stock ticker symbol is "TWO." **3. What is Two Harbors Investment Corp's market cap?** Two Harbors Investment Corp's market cap is $3.8 billion as of March 8, 2023. **4. What is Two Harbors Investment Corp's dividend yield?** Two Harbors Investment Corp's dividend yield is 5.2% as of March 8, 2023. **5. What is Two Harbors Investment Corp's financial performance?** Two Harbors Investment Corp reported net income of $136 million and distributable earnings of $1.23 per share in the fourth quarter of 2022. **6. What is Two Harbors Investment Corp's business outlook?** Two Harbors Investment Corp expects to continue to generate strong earnings and dividends in the coming years. The company's business is supported by the strong demand for RMBS and the low interest rate environment. **7. What are the risks associated with investing in Two Harbors Investment Corp?** The main risks associated with investing in Two Harbors Investment Corp include interest rate risk, credit risk, and liquidity risk. **8. What is the best way to invest in Two Harbors Investment Corp?** The best way to invest in Two Harbors Investment Corp is to buy shares of the company's stock. You can buy shares of Two Harbors Investment Corp through a brokerage account. **9. What are some alternatives to investing in Two Harbors Investment Corp?** Some alternatives to investing in Two Harbors Investment Corp include investing in other REITs, investing in bonds, or investing in stocks. **10. Is Two Harbors Investment Corp a good investment?** Two Harbors Investment Corp is a good investment for investors who are looking for a high dividend yield and are willing to accept the risks associated with investing in a REIT.

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