Correlation Between Dow Jones and Arrow ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Arrow ETF 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 Dow Jones and Arrow ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Arrow ETF Trust, you can compare the effects of market volatilities on Dow Jones and Arrow ETF 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 Dow Jones with a short position of Arrow ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Arrow ETF.
Diversification Opportunities for Dow Jones and Arrow ETF
Good diversification
The 3 months correlation between Dow and Arrow is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Arrow ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow ETF Trust and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Arrow ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow ETF Trust has no effect on the direction of Dow Jones i.e., Dow Jones and Arrow ETF go up and down completely randomly.
Pair Corralation between Dow Jones and Arrow ETF
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.17 times more return on investment than Arrow ETF. However, Dow Jones is 1.17 times more volatile than Arrow ETF Trust. It trades about 0.11 of its potential returns per unit of risk. Arrow ETF Trust is currently generating about 0.08 per unit of risk. If you would invest 3,858,519 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 632,546 from holding Dow Jones Industrial or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Arrow ETF Trust
Performance |
| Timeline |
Dow Jones and Arrow ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Arrow ETF Trust
Pair trading matchups for Arrow ETF
Pair Trading with Dow Jones and Arrow ETF
The main advantage of trading using opposite Dow Jones and Arrow ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Arrow ETF 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 Arrow ETF will offset losses from the drop in Arrow ETF's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Arrow ETF vs. iShares Morningstar Multi Asset | Arrow ETF vs. Amplify High Income | Arrow ETF vs. First Trust Multi Asset | Arrow ETF vs. SPDR SSgA Income |
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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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