Correlation Between Visa and Arbor Realty

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Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Arbor Realty Trust, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Arbor Realty.

Diversification Opportunities for Visa and Arbor Realty

VisaArborDiversified AwayVisaArborDiversified Away100%
-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Visa and Arbor is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Arbor Realty go up and down completely randomly.

Pair Corralation between Visa and Arbor Realty

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.88 times more return on investment than Arbor Realty. However, Visa Class A is 1.14 times less risky than Arbor Realty. It trades about 0.25 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.1 per unit of risk. If you would invest  27,117  in Visa Class A on September 26, 2024 and sell it today you would earn a total of  4,948  from holding Visa Class A or generate 18.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Arbor Realty Trust

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -50510
JavaScript chart by amCharts 3.21.15V ABR
       Timeline  
Visa Class A 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec280290300310320
Arbor Realty Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest unfluctuating performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec13.51414.51515.5

Visa and Arbor Realty Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.01-3.0-1.99-0.990.01.042.113.194.265.33 0.050.100.150.20
JavaScript chart by amCharts 3.21.15V ABR
       Returns  

Pair Trading with Visa and Arbor Realty

The main advantage of trading using opposite Visa and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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