Correlation Between GM and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Arbor Realty Trust, you can compare the effects of market volatilities on GM 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 GM with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Arbor Realty.
Diversification Opportunities for GM and Arbor Realty
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GM and Arbor is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Arbor Realty go up and down completely randomly.
Pair Corralation between GM and Arbor Realty
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.52 times more return on investment than Arbor Realty. However, GM is 1.52 times more volatile than Arbor Realty Trust. It trades about 0.07 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.05 per unit of risk. If you would invest 3,889 in General Motors on August 28, 2024 and sell it today you would earn a total of 2,131 from holding General Motors or generate 54.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Arbor Realty Trust
Performance |
| Timeline |
| General Motors |
| Arbor Realty Trust |
GM and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Arbor Realty
The main advantage of trading using opposite GM and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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.| Arbor Realty vs. Arbor Realty Trust | Arbor Realty vs. Arbor Realty Trust | Arbor Realty vs. ACRES Commercial Realty | Arbor Realty vs. ARMOUR Residential REIT |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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