Correlation Between Regional Management and Arbor Realty

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

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

Diversification Opportunities for Regional Management and Arbor Realty

-0.63

Correlation Coefficient

Regional Management  Arbor Realty

Excellent diversification

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

Pair Corralation between Regional Management and Arbor Realty

Allowing for the 90-day total investment horizon Regional Management Corp is expected to generate 1.57 times more return on investment than Arbor Realty. However, Regional Management is 1.57 times more volatile than Arbor Realty Trust. It trades about -0.18 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.39 per unit of risk. If you would invest  3,409  in Regional Management Corp on October 14, 2024 and sell it today you would lose (267.00) from holding Regional Management Corp or give up 7.83% of portfolio value over 90 days.

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

Regional Management Corp  vs.  Arbor Realty Trust

Regional Management Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Management Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Regional Management and Arbor Realty

The main advantage of trading using opposite Regional Management and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Management 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 Regional Management 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.