Correlation Between Arlington Asset and Arbor Realty

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

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

Diversification Opportunities for Arlington Asset and Arbor Realty

0.18

Correlation Coefficient

Arlington Asset  Arbor Realty

Average diversification

The 3 months correlation between Arlington and Arbor is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Arlington Asset Investment 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 Arlington Asset 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 Arlington Asset Investment 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 Arlington Asset i.e., Arlington Asset and Arbor Realty go up and down completely randomly.

Pair Corralation between Arlington Asset and Arbor Realty

If you would invest  1,294  in Arbor Realty Trust on January 24, 2024 and sell it today you would earn a total of  26.00  from holding Arbor Realty Trust or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Arlington Asset Investment  vs.  Arbor Realty Trust

Arlington Asset Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arlington Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Arlington Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arbor Realty Trust

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Realty Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Arbor Realty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Arlington Asset and Arbor Realty

The main advantage of trading using opposite Arlington Asset and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arlington Asset 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 Arlington Asset Investment 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.