Correlation Between ARMOUR Residential and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both ARMOUR Residential 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 ARMOUR Residential and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARMOUR Residential REIT and Arbor Realty Trust, you can compare the effects of market volatilities on ARMOUR Residential 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 ARMOUR Residential with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARMOUR Residential and Arbor Realty.
Diversification Opportunities for ARMOUR Residential and Arbor Realty
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ARMOUR and Arbor is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding ARMOUR Residential REIT 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 ARMOUR Residential 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 ARMOUR Residential REIT 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 ARMOUR Residential i.e., ARMOUR Residential and Arbor Realty go up and down completely randomly.
Pair Corralation between ARMOUR Residential and Arbor Realty
Considering the 90-day investment horizon ARMOUR Residential is expected to generate 1.09 times less return on investment than Arbor Realty. But when comparing it to its historical volatility, ARMOUR Residential REIT is 1.25 times less risky than Arbor Realty. It trades about 0.02 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,376 in Arbor Realty Trust on October 21, 2024 and sell it today you would earn a total of 4.00 from holding Arbor Realty Trust or generate 0.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARMOUR Residential REIT vs. Arbor Realty Trust
Performance |
| Timeline |
| ARMOUR Residential REIT |
| Arbor Realty Trust |
ARMOUR Residential and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARMOUR Residential and Arbor Realty
The main advantage of trading using opposite ARMOUR Residential and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARMOUR Residential 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.| ARMOUR Residential vs. Ellington Financial | ARMOUR Residential vs. Two Harbors Investments | ARMOUR Residential vs. Dynex Capital | ARMOUR Residential vs. Ellington Residential Mortgage |
| Arbor Realty vs. Starwood Property Trust | Arbor Realty vs. Ready Capital Corp | Arbor Realty vs. Two Harbors Investments | Arbor Realty vs. AGNC Investment Corp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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