Correlation Between Sea and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Sea and Arrow Financial 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 Sea and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Arrow Financial, you can compare the effects of market volatilities on Sea and Arrow Financial 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 Sea with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Arrow Financial.
Diversification Opportunities for Sea and Arrow Financial
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sea and Arrow is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Sea 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 Sea are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Sea i.e., Sea and Arrow Financial go up and down completely randomly.
Pair Corralation between Sea and Arrow Financial
Allowing for the 90-day total investment horizon Sea is expected to generate 0.89 times more return on investment than Arrow Financial. However, Sea is 1.12 times less risky than Arrow Financial. It trades about 0.27 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.17 per unit of risk. If you would invest 9,535 in Sea on August 31, 2024 and sell it today you would earn a total of 1,845 from holding Sea or generate 19.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. Arrow Financial
Performance |
| Timeline |
| Sea |
| Arrow Financial |
Sea and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Arrow Financial
The main advantage of trading using opposite Sea and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea position performs unexpectedly, Arrow Financial 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 Financial will offset losses from the drop in Arrow Financial's long position.The idea behind Sea and Arrow Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Arrow Financial vs. Heritage Commerce Corp | Arrow Financial vs. Westamerica Bancorporation | Arrow Financial vs. Heritage Financial | Arrow Financial vs. National Bankshares |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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