Correlation Between Ready Capital and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both Ready 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 Ready 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 Ready Capital and Arbor Realty Trust, you can compare the effects of market volatilities on Ready 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 Ready Capital with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ready Capital and Arbor Realty.
Diversification Opportunities for Ready Capital and Arbor Realty
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ready and Arbor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ready Capital 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 Ready 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 Ready Capital 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 Ready Capital i.e., Ready Capital and Arbor Realty go up and down completely randomly.
Pair Corralation between Ready Capital and Arbor Realty
Assuming the 90 days horizon Ready Capital is expected to generate 1.48 times less return on investment than Arbor Realty. But when comparing it to its historical volatility, Ready Capital is 2.05 times less risky than Arbor Realty. It trades about 0.04 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,820 in Arbor Realty Trust on September 12, 2024 and sell it today you would earn a total of 30.00 from holding Arbor Realty Trust or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ready Capital vs. Arbor Realty Trust
Performance |
| Timeline |
| Ready Capital |
| Arbor Realty Trust |
Ready Capital and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ready Capital and Arbor Realty
The main advantage of trading using opposite Ready Capital and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ready 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.| Ready Capital vs. ACRES Commercial Realty | Ready Capital vs. Dynex Capital | Ready Capital vs. PennyMac Mortgage Investment | Ready Capital vs. AG Mortgage Investment |
| Arbor Realty vs. ACRES Commercial Realty | Arbor Realty vs. Dynex Capital | Arbor Realty vs. PennyMac Mortgage Investment | Arbor Realty vs. AG 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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