Correlation Between Hp and Arbor Realty

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Can any of the company-specific risk be diversified away by investing in both Hp 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 Hp and Arbor Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hp Inc and Arbor Realty Trust, you can compare the effects of market volatilities on Hp 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 Hp with a short position of Arbor Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hp and Arbor Realty.

Diversification Opportunities for Hp and Arbor Realty

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hp and Arbor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hp 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 Hp 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 Hp 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 Hp i.e., Hp and Arbor Realty go up and down completely randomly.

Pair Corralation between Hp and Arbor Realty

Considering the 90-day investment horizon Hp is expected to generate 1.12 times less return on investment than Arbor Realty. But when comparing it to its historical volatility, Hp Inc is 1.05 times less risky than Arbor Realty. It trades about 0.14 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,345  in Arbor Realty Trust on August 29, 2022 and sell it today you would earn a total of  119.00  from holding Arbor Realty Trust or generate 8.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Hp Inc  vs.  Arbor Realty Trust

 Performance (%) 
       Timeline  
Hp Inc 
Hp Performance
0 of 100
Over the last 90 days Hp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hp is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

Hp Price Channel

Arbor Realty Trust 
Arbor Performance
0 of 100
Over the last 90 days Arbor Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Arbor Realty is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Arbor Price Channel

Hp and Arbor Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hp and Arbor Realty

The main advantage of trading using opposite Hp and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hp 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.
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The idea behind Hp 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.
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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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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