Correlation Between Vroom and Arbor Realty

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

Diversification Opportunities for Vroom and Arbor Realty

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Vroom and Arbor is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Vroom 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 Vroom 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 Vroom 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 Vroom i.e., Vroom and Arbor Realty go up and down completely randomly.

Pair Corralation between Vroom and Arbor Realty

Considering the 90-day investment horizon Vroom Inc is expected to under-perform the Arbor Realty. In addition to that, Vroom is 3.29 times more volatile than Arbor Realty Trust. It trades about -0.07 of its total potential returns per unit of risk. Arbor Realty Trust is currently generating about 0.03 per unit of volatility. If you would invest  1,156  in Arbor Realty Trust on August 29, 2022 and sell it today you would earn a total of  308.00  from holding Arbor Realty Trust or generate 26.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Vroom Inc  vs.  Arbor Realty Trust

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in December 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom 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

Vroom and Arbor Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Arbor Realty

The main advantage of trading using opposite Vroom and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom 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 Vroom 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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