Correlation Between Snap and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Arbor Realty Trust, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Arbor Realty.
Diversification Opportunities for Snap and Arbor Realty
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Arbor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc 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 Snap 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 Snap Inc 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 Snap i.e., Snap and Arbor Realty go up and down completely randomly.
Pair Corralation between Snap and Arbor Realty
Given the investment horizon of 90 days Snap Inc is expected to generate 3.15 times more return on investment than Arbor Realty. However, Snap is 3.15 times more volatile than Arbor Realty Trust. It trades about 0.02 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 1,212 in Snap Inc on August 28, 2024 and sell it today you would lose (52.00) from holding Snap Inc or give up 4.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Arbor Realty Trust
Performance |
| Timeline |
| Snap Inc |
| Arbor Realty Trust |
Snap and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Arbor Realty
The main advantage of trading using opposite Snap and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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