Correlation Between Annaly Capital and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both Annaly Capital 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 Annaly Capital and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Annaly Capital Management and Arbor Realty Trust, you can compare the effects of market volatilities on Annaly Capital 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 Annaly Capital with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Annaly Capital and Arbor Realty.
Diversification Opportunities for Annaly Capital and Arbor Realty
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Annaly and Arbor is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management 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 Annaly Capital 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 Annaly Capital Management 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 Annaly Capital i.e., Annaly Capital and Arbor Realty go up and down completely randomly.
Pair Corralation between Annaly Capital and Arbor Realty
Assuming the 90 days trading horizon Annaly Capital Management is expected to generate 0.32 times more return on investment than Arbor Realty. However, Annaly Capital Management is 3.17 times less risky than Arbor Realty. It trades about 0.17 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.02 per unit of risk. If you would invest 2,528 in Annaly Capital Management on October 20, 2024 and sell it today you would earn a total of 27.00 from holding Annaly Capital Management or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Annaly Capital Management vs. Arbor Realty Trust
Performance |
| Timeline |
| Annaly Capital Management |
| Arbor Realty Trust |
Annaly Capital and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Annaly Capital and Arbor Realty
The main advantage of trading using opposite Annaly Capital and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Annaly Capital 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.| Annaly Capital vs. Annaly Capital Management | Annaly Capital vs. Annaly Capital Management | Annaly Capital vs. AGNC Investment Corp | Annaly Capital vs. AGNC Investment Corp |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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