Correlation Between Arrow Managed and Touchstone Arbitrage
Can any of the company-specific risk be diversified away by investing in both Arrow Managed and Touchstone Arbitrage 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 Arrow Managed and Touchstone Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Managed Futures and Touchstone Arbitrage Fund, you can compare the effects of market volatilities on Arrow Managed and Touchstone Arbitrage 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 Arrow Managed with a short position of Touchstone Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Managed and Touchstone Arbitrage.
Diversification Opportunities for Arrow Managed and Touchstone Arbitrage
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Arrow and Touchstone is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Touchstone Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Arbitrage and Arrow Managed 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 Arrow Managed Futures are associated (or correlated) with Touchstone Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Arbitrage has no effect on the direction of Arrow Managed i.e., Arrow Managed and Touchstone Arbitrage go up and down completely randomly.
Pair Corralation between Arrow Managed and Touchstone Arbitrage
Assuming the 90 days horizon Arrow Managed Futures is expected to generate 7.51 times more return on investment than Touchstone Arbitrage. However, Arrow Managed is 7.51 times more volatile than Touchstone Arbitrage Fund. It trades about 0.04 of its potential returns per unit of risk. Touchstone Arbitrage Fund is currently generating about 0.21 per unit of risk. If you would invest 516.00 in Arrow Managed Futures on September 12, 2024 and sell it today you would earn a total of 67.00 from holding Arrow Managed Futures or generate 12.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Managed Futures vs. Touchstone Arbitrage Fund
Performance |
| Timeline |
| Arrow Managed Futures |
| Touchstone Arbitrage |
Arrow Managed and Touchstone Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Managed and Touchstone Arbitrage
The main advantage of trading using opposite Arrow Managed and Touchstone Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Managed position performs unexpectedly, Touchstone Arbitrage 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 Touchstone Arbitrage will offset losses from the drop in Touchstone Arbitrage's long position.| Arrow Managed vs. 1919 Financial Services | Arrow Managed vs. Davis Financial Fund | Arrow Managed vs. Vanguard Financials Index | Arrow Managed vs. Prudential Jennison Financial |
| Touchstone Arbitrage vs. Pioneer Diversified High | Touchstone Arbitrage vs. Delaware Limited Term Diversified | Touchstone Arbitrage vs. Davenport Small Cap | Touchstone Arbitrage vs. Sentinel Small Pany |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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