Correlation Between Arbor Realty and Ameriprise Financial

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

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

Diversification Opportunities for Arbor Realty and Ameriprise Financial

-0.2

Correlation Coefficient

Arbor Realty  Ameriprise Financial

Good diversification

The 3 months correlation between Arbor and Ameriprise is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial and Arbor Realty 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 Arbor Realty Trust are associated (or correlated) with Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Arbor Realty i.e., Arbor Realty and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Arbor Realty and Ameriprise Financial

Considering the 90-day investment horizon Arbor Realty Trust is expected to generate 1.91 times more return on investment than Ameriprise Financial. However, Arbor Realty is 1.91 times more volatile than Ameriprise Financial. It trades about -0.04 of its potential returns per unit of risk. Ameriprise Financial is currently generating about -0.2 per unit of risk. If you would invest  1,261  in Arbor Realty Trust on January 19, 2024 and sell it today you would lose (23.00) from holding Arbor Realty Trust or give up 1.82% of portfolio value over 90 days.

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

Arbor Realty Trust  vs.  Ameriprise Financial

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 latest weak 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.

Ameriprise Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Ameriprise Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Arbor Realty and Ameriprise Financial

The main advantage of trading using opposite Arbor Realty and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Realty position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.

The idea behind Arbor Realty Trust and Ameriprise Financial 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.