Correlation Between Rising Rates and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Rising Rates 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 Rising Rates and Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rising Rates Opportunity and Arrow Managed Futures, you can compare the effects of market volatilities on Rising Rates 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 Rising Rates with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Rates and Arrow Managed.
Diversification Opportunities for Rising Rates and Arrow Managed
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rising and Arrow is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity 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 Rising Rates 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 Rising Rates Opportunity 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 Rising Rates i.e., Rising Rates and Arrow Managed go up and down completely randomly.
Pair Corralation between Rising Rates and Arrow Managed
Assuming the 90 days horizon Rising Rates Opportunity is expected to under-perform the Arrow Managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rising Rates Opportunity is 3.32 times less risky than Arrow Managed. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Arrow Managed Futures is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 561.00 in Arrow Managed Futures on November 3, 2024 and sell it today you would earn a total of 36.00 from holding Arrow Managed Futures or generate 6.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rising Rates Opportunity vs. Arrow Managed Futures
Performance |
| Timeline |
| Rising Rates Opportunity |
| Arrow Managed Futures |
Rising Rates and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rising Rates and Arrow Managed
The main advantage of trading using opposite Rising Rates and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Rates 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.| Rising Rates vs. Inverse Government Long | Rising Rates vs. Inverse Government Long | Rising Rates vs. Inverse Government Long | Rising Rates vs. Inverse Government Long |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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