Correlation Between Cherry Hill and Arbor Realty

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

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

Diversification Opportunities for Cherry Hill and Arbor Realty

0.63

Correlation Coefficient

Cherry Hill  Arbor Realty

Poor diversification

The 3 months correlation between Cherry and Arbor is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cherry Hill Mortgage 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 Cherry Hill 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 Cherry Hill Mortgage 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 Cherry Hill i.e., Cherry Hill and Arbor Realty go up and down completely randomly.

Pair Corralation between Cherry Hill and Arbor Realty

Given the investment horizon of 90 days Cherry Hill Mortgage is expected to generate 1.3 times more return on investment than Arbor Realty. However, Cherry Hill is 1.3 times more volatile than Arbor Realty Trust. It trades about -0.08 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.21 per unit of risk. If you would invest  270.00  in Cherry Hill Mortgage on September 27, 2024 and sell it today you would lose (8.00) from holding Cherry Hill Mortgage or give up 2.96% of portfolio value over 90 days.

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

Cherry Hill Mortgage  vs.  Arbor Realty Trust

Cherry Hill Mortgage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cherry Hill Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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 unfluctuating 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 Cherry Hill and Arbor Realty

The main advantage of trading using opposite Cherry Hill and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cherry Hill 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 Cherry Hill Mortgage 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.