Correlation Between New York and Arbor Realty

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

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

Diversification Opportunities for New York and Arbor Realty

0.92

Correlation Coefficient

New York  Arbor Realty

Almost no diversification

The 3 months correlation between New and Arbor is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding New York Mortgage 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 New York 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 New York Mortgage 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 New York i.e., New York and Arbor Realty go up and down completely randomly.

Pair Corralation between New York and Arbor Realty

Assuming the 90 days horizon New York Mortgage is expected to generate 0.81 times more return on investment than Arbor Realty. However, New York Mortgage is 1.23 times less risky than Arbor Realty. It trades about 0.1 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.07 per unit of risk. If you would invest  1,411  in New York Mortgage on September 12, 2024 and sell it today you would earn a total of  832.00  from holding New York Mortgage or generate 58.97% return on investment over 90 days.

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

New York Mortgage  vs.  Arbor Realty Trust

New York Mortgage

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New York Mortgage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, New York may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arbor Realty Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Realty Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Arbor Realty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New York and Arbor Realty

The main advantage of trading using opposite New York and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York 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 New York Mortgage 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 Stocks Directory module to find actively traded stocks across global markets.