Correlation Between Arbor Realty and New York

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

Diversification Opportunities for Arbor Realty and New York

-0.19

Correlation Coefficient

Arbor Realty  New York

Good diversification

The 3 months correlation between Arbor and New is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and New York Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York 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 New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Mortgage has no effect on the direction of Arbor Realty i.e., Arbor Realty and New York go up and down completely randomly.

Pair Corralation between Arbor Realty and New York

Assuming the 90 days trading horizon Arbor Realty Trust is expected to under-perform the New York. But the preferred stock apears to be less risky and, when comparing its historical volatility, Arbor Realty Trust is 1.03 times less risky than New York. The preferred stock trades about -0.26 of its potential returns per unit of risk. The New York Mortgage is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,967  in New York Mortgage on November 29, 2024 and sell it today you would lose (44.00) from holding New York Mortgage or give up 2.24% of portfolio value over 90 days.

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

Arbor Realty Trust  vs.  New York 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.

New York Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days New York Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, New York 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 New York

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

The idea behind Arbor Realty Trust and New York 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.

Check out your portfolio center.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.