Correlation Between IShares Trust and Arrow DWA
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Arrow DWA 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 IShares Trust and Arrow DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Arrow DWA Tactical, you can compare the effects of market volatilities on IShares Trust and Arrow DWA 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 IShares Trust with a short position of Arrow DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Arrow DWA.
Diversification Opportunities for IShares Trust and Arrow DWA
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Arrow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Arrow DWA Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow DWA Tactical and IShares Trust 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 iShares Trust are associated (or correlated) with Arrow DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow DWA Tactical has no effect on the direction of IShares Trust i.e., IShares Trust and Arrow DWA go up and down completely randomly.
Pair Corralation between IShares Trust and Arrow DWA
Given the investment horizon of 90 days iShares Trust is expected to generate 0.8 times more return on investment than Arrow DWA. However, iShares Trust is 1.25 times less risky than Arrow DWA. It trades about 0.13 of its potential returns per unit of risk. Arrow DWA Tactical is currently generating about 0.09 per unit of risk. If you would invest 2,584 in iShares Trust on September 14, 2024 and sell it today you would earn a total of 692.00 from holding iShares Trust or generate 26.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. Arrow DWA Tactical
Performance |
| Timeline |
| iShares Trust |
| Arrow DWA Tactical |
IShares Trust and Arrow DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Arrow DWA
The main advantage of trading using opposite IShares Trust and Arrow DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Arrow DWA 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 DWA will offset losses from the drop in Arrow DWA's long position.| IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. EA Series Trust | IShares Trust vs. Aptus Defined Risk |
| Arrow DWA vs. Arrow DWA Tactical | Arrow DWA vs. AlphaMark Actively Managed | Arrow DWA vs. FlexShares Real Assets | Arrow DWA vs. First Trust 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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