Correlation Between Arbor Realty and Annaly Capital
Can any of the company-specific risk be diversified away by investing in both Arbor Realty and Annaly Capital 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 Annaly Capital 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 Annaly Capital Management, you can compare the effects of market volatilities on Arbor Realty and Annaly Capital 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 Annaly Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Realty and Annaly Capital.
Diversification Opportunities for Arbor Realty and Annaly Capital
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arbor and Annaly is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of Arbor Realty i.e., Arbor Realty and Annaly Capital go up and down completely randomly.
Pair Corralation between Arbor Realty and Annaly Capital
Assuming the 90 days trading horizon Arbor Realty is expected to generate 1.93 times less return on investment than Annaly Capital. In addition to that, Arbor Realty is 4.79 times more volatile than Annaly Capital Management. It trades about 0.01 of its total potential returns per unit of risk. Annaly Capital Management is currently generating about 0.13 per unit of volatility. If you would invest 2,538 in Annaly Capital Management on August 27, 2024 and sell it today you would earn a total of 15.00 from holding Annaly Capital Management or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arbor Realty Trust vs. Annaly Capital Management
Performance |
| Timeline |
| Arbor Realty Trust |
| Annaly Capital Management |
Arbor Realty and Annaly Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbor Realty and Annaly Capital
The main advantage of trading using opposite Arbor Realty and Annaly Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Realty position performs unexpectedly, Annaly Capital 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 Annaly Capital will offset losses from the drop in Annaly Capital's long position.| Arbor Realty vs. New York Mortgage | Arbor Realty vs. New York Mortgage | Arbor Realty vs. Two Harbors Investment | Arbor Realty vs. Two Harbors Investment |
| Annaly Capital vs. PennyMac Mortgage Investment | Annaly Capital vs. Two Harbors Investment | Annaly Capital vs. Chimera Investment | Annaly Capital vs. PennyMac Mortgage 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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