Correlation Between Arbor Realty and Arbor Realty

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

Diversification Opportunities for Arbor Realty and Arbor Realty

0.36

Correlation Coefficient

Arbor Realty  Arbor Realty

Weak diversification

The 3 months correlation between Arbor and Arbor is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Arbor Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Realty Trust 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 Arbor Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Realty Trust has no effect on the direction of Arbor Realty i.e., Arbor Realty and Arbor Realty go up and down completely randomly.

Pair Corralation between Arbor Realty and Arbor Realty

Assuming the 90 days trading horizon Arbor Realty Trust is expected to under-perform the Arbor Realty. But the preferred stock apears to be less risky and, when comparing its historical volatility, Arbor Realty Trust is 1.01 times less risky than Arbor Realty. The preferred stock trades about -0.11 of its potential returns per unit of risk. The Arbor Realty Trust is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,828  in Arbor Realty Trust on December 29, 2024 and sell it today you would lose (77.00) from holding Arbor Realty Trust or give up 4.21% of portfolio value over 90 days.

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

Arbor Realty Trust  vs.  Arbor Realty Trust

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. Despite nearly stable basic indicators, Arbor Realty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Arbor Realty and Arbor Realty

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

The idea behind Arbor Realty Trust and Arbor Realty Trust 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.