Correlation Between Qudian and Arbor Realty

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

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

Diversification Opportunities for Qudian and Arbor Realty

-0.54

Correlation Coefficient

Qudian  Arbor Realty

Excellent diversification

The 3 months correlation between Qudian and Arbor is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Qudian Inc 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 Qudian 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 Qudian Inc 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 Qudian i.e., Qudian and Arbor Realty go up and down completely randomly.

Pair Corralation between Qudian and Arbor Realty

Allowing for the 90-day total investment horizon Qudian Inc is expected to generate 1.64 times more return on investment than Arbor Realty. However, Qudian is 1.64 times more volatile than Arbor Realty Trust. It trades about 0.04 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.0 per unit of risk. If you would invest  213.00  in Qudian Inc on September 20, 2024 and sell it today you would earn a total of  53.00  from holding Qudian Inc or generate 24.88% return on investment over 90 days.

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

Qudian Inc  vs.  Arbor Realty Trust

Qudian Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Qudian 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 Qudian and Arbor Realty

The main advantage of trading using opposite Qudian and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qudian 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 Qudian Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.