Correlation Between Arbor Realty and Ready Capital
Can any of the company-specific risk be diversified away by investing in both Arbor Realty and Ready 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 Ready 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 Ready Capital, you can compare the effects of market volatilities on Arbor Realty and Ready 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 Ready Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Realty and Ready Capital.
Diversification Opportunities for Arbor Realty and Ready Capital
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Arbor and Ready is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Realty Trust and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital 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 Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital has no effect on the direction of Arbor Realty i.e., Arbor Realty and Ready Capital go up and down completely randomly.
Pair Corralation between Arbor Realty and Ready Capital
Assuming the 90 days trading horizon Arbor Realty Trust is expected to generate 1.86 times more return on investment than Ready Capital. However, Arbor Realty is 1.86 times more volatile than Ready Capital. It trades about 0.15 of its potential returns per unit of risk. Ready Capital is currently generating about -0.03 per unit of risk. If you would invest 2,048 in Arbor Realty Trust on August 31, 2024 and sell it today you would earn a total of 77.00 from holding Arbor Realty Trust or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arbor Realty Trust vs. Ready Capital
Performance |
| Timeline |
| Arbor Realty Trust |
| Ready Capital |
Arbor Realty and Ready Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbor Realty and Ready Capital
The main advantage of trading using opposite Arbor Realty and Ready Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Realty position performs unexpectedly, Ready 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 Ready Capital will offset losses from the drop in Ready Capital's long position.| Arbor Realty vs. Arbor Realty Trust | Arbor Realty vs. Arbor Realty Trust | Arbor Realty vs. Chimera Investment | Arbor Realty vs. ARMOUR Residential REIT |
| Ready Capital vs. PennyMac Mortgage Investment | Ready Capital vs. ARMOUR Residential REIT | Ready Capital vs. Rithm Capital Corp | Ready Capital vs. Dynex Capital |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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