Correlation Between Aldel Financial and Arbor Realty

Can any of the company-specific risk be diversified away by investing in both Aldel Financial 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 Aldel Financial and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aldel Financial II and Arbor Realty Trust, you can compare the effects of market volatilities on Aldel Financial 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 Aldel Financial with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and Arbor Realty.

Diversification Opportunities for Aldel Financial and Arbor Realty

-0.44

Correlation Coefficient

Aldel Financial  Arbor Realty

Very good diversification

The 3 months correlation between Aldel and Arbor is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II 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 Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Arbor Realty go up and down completely randomly.

Pair Corralation between Aldel Financial and Arbor Realty

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.05 times more return on investment than Arbor Realty. However, Aldel Financial II is 21.06 times less risky than Arbor Realty. It trades about 0.25 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.05 per unit of risk. If you would invest  990.00  in Aldel Financial II on December 18, 2024 and sell it today you would earn a total of  16.00  from holding Aldel Financial II or generate 1.62% return on investment over 90 days.

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

Aldel Financial II  vs.  Arbor Realty Trust

Aldel Financial II

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current 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. 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.

Pair Trading with Aldel Financial and Arbor Realty

The main advantage of trading using opposite Aldel Financial and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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.