Correlation Between Arbor Realty and Trinity Capital

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

Diversification Opportunities for Arbor Realty and Trinity Capital

-0.69

Correlation Coefficient

Arbor Realty  Trinity Capital

Excellent diversification

The 3 months correlation between Arbor and Trinity is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Trinity Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinity Capital 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 Trinity Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinity Capital has no effect on the direction of Arbor Realty i.e., Arbor Realty and Trinity Capital go up and down completely randomly.

Pair Corralation between Arbor Realty and Trinity Capital

Considering the 90-day investment horizon Arbor Realty is expected to generate 1.5 times less return on investment than Trinity Capital. In addition to that, Arbor Realty is 1.92 times more volatile than Trinity Capital. It trades about 0.03 of its total potential returns per unit of risk. Trinity Capital is currently generating about 0.08 per unit of volatility. If you would invest  989.00  in Trinity Capital on October 24, 2024 and sell it today you would earn a total of  487.00  from holding Trinity Capital or generate 49.24% return on investment over 90 days.

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

Arbor Realty Trust  vs.  Trinity Capital

Arbor Realty Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Trinity Capital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Trinity Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arbor Realty and Trinity Capital

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

The idea behind Arbor Realty Trust and Trinity Capital 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 Stocks Directory module to find actively traded stocks across global markets.