Correlation Between AGNC Investment and Arbor Realty

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

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

Diversification Opportunities for AGNC Investment and Arbor Realty

-0.18

Correlation Coefficient

AGNC Investment  Arbor Realty

Good diversification

The 3 months correlation between AGNC and Arbor is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding AGNC Investment Corp 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 AGNC Investment 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 AGNC Investment Corp 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 AGNC Investment i.e., AGNC Investment and Arbor Realty go up and down completely randomly.

Pair Corralation between AGNC Investment and Arbor Realty

Given the investment horizon of 90 days AGNC Investment Corp is expected to generate 0.53 times more return on investment than Arbor Realty. However, AGNC Investment Corp is 1.88 times less risky than Arbor Realty. It trades about -0.05 of its potential returns per unit of risk. Arbor Realty Trust is currently generating about -0.15 per unit of risk. If you would invest  896.00  in AGNC Investment Corp on January 8, 2025 and sell it today you would lose (41.00) from holding AGNC Investment Corp or give up 4.58% of portfolio value over 90 days.

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

AGNC Investment Corp  vs.  Arbor Realty Trust

AGNC Investment Corp

Risk-Adjusted Performance

Very Weak

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

Arbor Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arbor Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with AGNC Investment and Arbor Realty

The main advantage of trading using opposite AGNC Investment and Arbor Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGNC Investment 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 AGNC Investment Corp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.