Correlation Between TPG RE and Arbor Realty
Can any of the company-specific risk be diversified away by investing in both TPG RE 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 TPG RE and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TPG RE Finance and Arbor Realty Trust, you can compare the effects of market volatilities on TPG RE 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 TPG RE with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of TPG RE and Arbor Realty.
Diversification Opportunities for TPG RE and Arbor Realty
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between TPG and Arbor is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TPG RE Finance 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 TPG RE 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 TPG RE Finance 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 TPG RE i.e., TPG RE and Arbor Realty go up and down completely randomly.
Pair Corralation between TPG RE and Arbor Realty
Assuming the 90 days trading horizon TPG RE Finance is expected to generate 1.2 times more return on investment than Arbor Realty. However, TPG RE is 1.2 times more volatile than Arbor Realty Trust. It trades about 0.05 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 1,346 in TPG RE Finance on September 4, 2024 and sell it today you would earn a total of 556.00 from holding TPG RE Finance or generate 41.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
TPG RE Finance vs. Arbor Realty Trust
Performance |
| Timeline |
| TPG RE Finance |
| Arbor Realty Trust |
TPG RE and Arbor Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TPG RE and Arbor Realty
The main advantage of trading using opposite TPG RE and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG RE 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.| TPG RE vs. ACRES Commercial Realty | TPG RE vs. Dynex Capital | TPG RE vs. PennyMac Mortgage Investment | TPG RE vs. AG Mortgage 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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