Correlation Between California Bond and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both California Bond 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 California Bond and Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Arrow Managed Futures, you can compare the effects of market volatilities on California Bond 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 California Bond with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Arrow Managed.
Diversification Opportunities for California Bond and Arrow Managed
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between California and Arrow is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding California Bond 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 California Bond 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 California Bond 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 California Bond i.e., California Bond and Arrow Managed go up and down completely randomly.
Pair Corralation between California Bond and Arrow Managed
Assuming the 90 days horizon California Bond is expected to generate 2.69 times less return on investment than Arrow Managed. But when comparing it to its historical volatility, California Bond Fund is 5.92 times less risky than Arrow Managed. It trades about 0.03 of its potential returns per unit of risk. Arrow Managed Futures is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 558.00 in Arrow Managed Futures on October 14, 2024 and sell it today you would earn a total of 34.00 from holding Arrow Managed Futures or generate 6.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Arrow Managed Futures
Performance |
| Timeline |
| California Bond |
| Arrow Managed Futures |
California Bond and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Arrow Managed
The main advantage of trading using opposite California Bond and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond 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.| California Bond vs. Dreyfus Technology Growth | California Bond vs. Columbia Global Technology | California Bond vs. Goldman Sachs Technology | California Bond vs. Towpath Technology |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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