Correlation Between Short-term Government and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Short-term Government 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 Short-term Government and Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Arrow Managed Futures, you can compare the effects of market volatilities on Short-term Government 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 Short-term Government with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Arrow Managed.
Diversification Opportunities for Short-term Government and Arrow Managed
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Short-term and Arrow is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund 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 Short-term Government 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 Short Term Government Fund 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 Short-term Government i.e., Short-term Government and Arrow Managed go up and down completely randomly.
Pair Corralation between Short-term Government and Arrow Managed
Assuming the 90 days horizon Short Term Government Fund is expected to under-perform the Arrow Managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Term Government Fund is 12.8 times less risky than Arrow Managed. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Arrow Managed Futures is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 576.00 in Arrow Managed Futures on October 16, 2024 and sell it today you would earn a total of 12.00 from holding Arrow Managed Futures or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Short Term Government Fund vs. Arrow Managed Futures
Performance |
| Timeline |
| Short Term Government |
| Arrow Managed Futures |
Short-term Government and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Government and Arrow Managed
The main advantage of trading using opposite Short-term Government and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Government 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.The idea behind Short Term Government Fund and Arrow Managed Futures 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.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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