Correlation Between JP Morgan and Arbor Realty

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

Diversification Opportunities for JP Morgan and Arbor Realty

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between JP Morgan and Arbor is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase 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 JP Morgan 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 JP Morgan Chase 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 JP Morgan i.e., JP Morgan and Arbor Realty go up and down completely randomly.

Pair Corralation between JP Morgan and Arbor Realty

Considering the 90-day investment horizon JP Morgan is expected to generate 1.32 times less return on investment than Arbor Realty. But when comparing it to its historical volatility, JP Morgan Chase is 1.2 times less risky than Arbor Realty. It trades about 0.03 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,203  in Arbor Realty Trust on August 30, 2022 and sell it today you would earn a total of  256.00  from holding Arbor Realty Trust or generate 21.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Arbor Realty Trust

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, JP Morgan revealed solid returns over the last few months and may actually be approaching a breakup point.

JP Morgan Price Channel

Arbor Realty Trust 
Arbor Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Realty Trust are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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

JP Morgan and Arbor Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and Arbor Realty

The main advantage of trading using opposite JP Morgan and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan 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 JP Morgan Chase 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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