Correlation Between Arbor Realty and Cherry Hill

Can any of the company-specific risk be diversified away by investing in both Arbor Realty and Cherry Hill 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 Cherry Hill 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 Cherry Hill Mortgage, you can compare the effects of market volatilities on Arbor Realty and Cherry Hill 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 Cherry Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Realty and Cherry Hill.

Diversification Opportunities for Arbor Realty and Cherry Hill

-0.58

Correlation Coefficient

Arbor Realty  Cherry Hill

Excellent diversification

The 3 months correlation between Arbor and Cherry is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Cherry Hill Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cherry Hill Mortgage 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 Cherry Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cherry Hill Mortgage has no effect on the direction of Arbor Realty i.e., Arbor Realty and Cherry Hill go up and down completely randomly.

Pair Corralation between Arbor Realty and Cherry Hill

Assuming the 90 days trading horizon Arbor Realty Trust is expected to under-perform the Cherry Hill. In addition to that, Arbor Realty is 1.74 times more volatile than Cherry Hill Mortgage. It trades about -0.08 of its total potential returns per unit of risk. Cherry Hill Mortgage is currently generating about 0.09 per unit of volatility. If you would invest  2,399  in Cherry Hill Mortgage on December 30, 2024 and sell it today you would earn a total of  64.00  from holding Cherry Hill Mortgage or generate 2.67% return on investment over 90 days.

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

Arbor Realty Trust  vs.  Cherry Hill Mortgage

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.

Cherry Hill Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cherry Hill Mortgage are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Cherry Hill is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arbor Realty and Cherry Hill

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

The idea behind Arbor Realty Trust and Cherry Hill Mortgage 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.