Correlation Between ACRES Commercial and Arbor Realty

Can any of the company-specific risk be diversified away by investing in both ACRES Commercial 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 ACRES Commercial and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ACRES Commercial Realty and Arbor Realty Trust, you can compare the effects of market volatilities on ACRES Commercial 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 ACRES Commercial with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACRES Commercial and Arbor Realty.

Diversification Opportunities for ACRES Commercial and Arbor Realty

0.66

Correlation Coefficient

ACRES Commercial  Arbor Realty

Poor diversification

The 3 months correlation between ACRES and Arbor is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ACRES Commercial Realty 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 ACRES Commercial 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 ACRES Commercial Realty 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 ACRES Commercial i.e., ACRES Commercial and Arbor Realty go up and down completely randomly.

Pair Corralation between ACRES Commercial and Arbor Realty

Assuming the 90 days trading horizon ACRES Commercial Realty is expected to generate 0.63 times more return on investment than Arbor Realty. However, ACRES Commercial Realty is 1.59 times less risky than Arbor Realty. It trades about -0.06 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.12 per unit of risk. If you would invest  2,308  in ACRES Commercial Realty on September 2, 2024 and sell it today you would lose (28.00) from holding ACRES Commercial Realty or give up 1.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ACRES Commercial Realty  vs.  Arbor Realty Trust

ACRES Commercial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACRES Commercial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ACRES Commercial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arbor Realty Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Realty Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Arbor Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ACRES Commercial and Arbor Realty

The main advantage of trading using opposite ACRES Commercial and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACRES Commercial 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 ACRES Commercial Realty 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.