Correlation Between Government Street and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Government Street and Arrow Managed 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 Government Street and Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Government Street Equity and Arrow Managed Futures, you can compare the effects of market volatilities on Government Street and Arrow Managed 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 Government Street with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Government Street and Arrow Managed.
Diversification Opportunities for Government Street and Arrow Managed
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Government and Arrow is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Government Street Equity and Arrow Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Managed Futures and Government Street 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 Government Street Equity are associated (or correlated) with Arrow Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Managed Futures has no effect on the direction of Government Street i.e., Government Street and Arrow Managed go up and down completely randomly.
Pair Corralation between Government Street and Arrow Managed
Assuming the 90 days horizon Government Street Equity is expected to generate 0.8 times more return on investment than Arrow Managed. However, Government Street Equity is 1.26 times less risky than Arrow Managed. It trades about 0.12 of its potential returns per unit of risk. Arrow Managed Futures is currently generating about 0.07 per unit of risk. If you would invest 11,218 in Government Street Equity on November 3, 2024 and sell it today you would earn a total of 1,697 from holding Government Street Equity or generate 15.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Government Street Equity vs. Arrow Managed Futures
Performance |
| Timeline |
| Government Street Equity |
| Arrow Managed Futures |
Government Street and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Government Street and Arrow Managed
The main advantage of trading using opposite Government Street and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Government Street position performs unexpectedly, Arrow Managed 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 Managed will offset losses from the drop in Arrow Managed's long position.| Government Street vs. Government Securities Fund | Government Street vs. Government Securities Fund | Government Street vs. Government High Quality | Government Street vs. Government Securities Fund |
| Arrow Managed vs. Gabelli Convertible And | Arrow Managed vs. Rationalpier 88 Convertible | Arrow Managed vs. Advent Claymore Convertible | Arrow Managed vs. Virtus Convertible |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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