Correlation Between Sachem Capital and Arbor Realty

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

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

Diversification Opportunities for Sachem Capital and Arbor Realty

-0.68

Correlation Coefficient

Sachem Capital  Arbor Realty

Excellent diversification

The 3 months correlation between Sachem and Arbor is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sachem Capital 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 Sachem Capital 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 Sachem Capital 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 Sachem Capital i.e., Sachem Capital and Arbor Realty go up and down completely randomly.

Pair Corralation between Sachem Capital and Arbor Realty

Given the investment horizon of 90 days Sachem Capital Corp is expected to under-perform the Arbor Realty. In addition to that, Sachem Capital is 3.16 times more volatile than Arbor Realty Trust. It trades about -0.17 of its total potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.21 per unit of volatility. If you would invest  1,804  in Arbor Realty Trust on September 2, 2024 and sell it today you would earn a total of  260.00  from holding Arbor Realty Trust or generate 14.41% return on investment over 90 days.

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

Sachem Capital Corp  vs.  Arbor Realty Trust

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental 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

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Realty Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Arbor Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sachem Capital and Arbor Realty

The main advantage of trading using opposite Sachem Capital and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sachem Capital 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 Sachem Capital 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.