Correlation Between LendingClub Corp and Arbor Realty

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

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

Diversification Opportunities for LendingClub Corp and Arbor Realty

-0.38

Correlation Coefficient

LendingClub Corp  Arbor Realty

Very good diversification

The 3 months correlation between LendingClub and Arbor is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp 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 LendingClub Corp 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 LendingClub Corp 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 LendingClub Corp i.e., LendingClub Corp and Arbor Realty go up and down completely randomly.

Pair Corralation between LendingClub Corp and Arbor Realty

Allowing for the 90-day total investment horizon LendingClub Corp is expected to generate 2.71 times more return on investment than Arbor Realty. However, LendingClub Corp is 2.71 times more volatile than Arbor Realty Trust. It trades about 0.15 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.26 per unit of risk. If you would invest  1,507  in LendingClub Corp on September 20, 2024 and sell it today you would earn a total of  151.00  from holding LendingClub Corp or generate 10.02% return on investment over 90 days.

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

LendingClub Corp  vs.  Arbor Realty Trust

LendingClub Corp

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LendingClub Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, LendingClub Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 relatively invariable fundamental drivers, Arbor Realty is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LendingClub Corp and Arbor Realty

The main advantage of trading using opposite LendingClub Corp and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LendingClub Corp 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 LendingClub Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.