Correlation Between Arbor Realty and KKR Real

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

Diversification Opportunities for Arbor Realty and KKR Real

0.28

Correlation Coefficient

Arbor Realty  KKR Real

Modest diversification

The 3 months correlation between Arbor and KKR is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and KKR Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Real Estate 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 KKR Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Real Estate has no effect on the direction of Arbor Realty i.e., Arbor Realty and KKR Real go up and down completely randomly.

Pair Corralation between Arbor Realty and KKR Real

Considering the 90-day investment horizon Arbor Realty Trust is expected to generate 1.16 times more return on investment than KKR Real. However, Arbor Realty is 1.16 times more volatile than KKR Real Estate. It trades about 0.03 of its potential returns per unit of risk. KKR Real Estate is currently generating about 0.01 per unit of risk. If you would invest  1,247  in Arbor Realty Trust on September 4, 2024 and sell it today you would earn a total of  167.00  from holding Arbor Realty Trust or generate 13.39% return on investment over 90 days.

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

Arbor Realty Trust  vs.  KKR Real Estate

Arbor Realty Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Realty Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Arbor Realty reported solid returns over the last few months and may actually be approaching a breakup point.

KKR Real Estate

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Real Estate are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, KKR Real is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arbor Realty and KKR Real

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

The idea behind Arbor Realty Trust and KKR Real Estate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.