Correlation Between Arbor Realty and Chimera Investment

Can any of the company-specific risk be diversified away by investing in both Arbor Realty and Chimera Investment 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 Arbor Realty and Chimera Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arbor Realty Trust and Chimera Investment, you can compare the effects of market volatilities on Arbor Realty and Chimera Investment 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 Arbor Realty with a short position of Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Realty and Chimera Investment.

Diversification Opportunities for Arbor Realty and Chimera Investment

-0.51

Correlation Coefficient

Arbor Realty  Chimera Investment

Excellent diversification

The 3 months correlation between Arbor and Chimera is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment and Arbor Realty 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 Arbor Realty Trust are associated (or correlated) with Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Arbor Realty i.e., Arbor Realty and Chimera Investment go up and down completely randomly.

Pair Corralation between Arbor Realty and Chimera Investment

Assuming the 90 days trading horizon Arbor Realty Trust is expected to generate 1.82 times more return on investment than Chimera Investment. However, Arbor Realty is 1.82 times more volatile than Chimera Investment. It trades about -0.04 of its potential returns per unit of risk. Chimera Investment is currently generating about -0.08 per unit of risk. If you would invest  1,841  in Arbor Realty Trust on December 30, 2024 and sell it today you would lose (31.00) from holding Arbor Realty Trust or give up 1.68% of portfolio value over 90 days.

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

Arbor Realty Trust  vs.  Chimera Investment

Arbor Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arbor Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arbor Realty is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chimera Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chimera Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Chimera Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arbor Realty and Chimera Investment

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

The idea behind Arbor Realty Trust and Chimera Investment 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.