Correlation Between Granite Point and Arbor Realty

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

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

Diversification Opportunities for Granite Point and Arbor Realty

0.45

Correlation Coefficient

Granite Point  Arbor Realty

Very weak diversification

The 3 months correlation between Granite and Arbor is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Granite Point 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 Granite Point 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 Granite Point 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 Granite Point i.e., Granite Point and Arbor Realty go up and down completely randomly.

Pair Corralation between Granite Point and Arbor Realty

Assuming the 90 days trading horizon Granite Point Mortgage is expected to generate 0.75 times more return on investment than Arbor Realty. However, Granite Point Mortgage is 1.34 times less risky than Arbor Realty. It trades about -0.01 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.11 per unit of risk. If you would invest  1,741  in Granite Point Mortgage on December 30, 2024 and sell it today you would lose (11.00) from holding Granite Point Mortgage or give up 0.63% of portfolio value over 90 days.

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

Granite Point Mortgage  vs.  Arbor Realty Trust

Granite Point Mortgage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Point Mortgage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Granite Point is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Granite Point and Arbor Realty

The main advantage of trading using opposite Granite Point and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Point 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 Granite Point 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.