Correlation Between Vanguard Long-term and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Vanguard Long-term 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 Vanguard Long-term and Arrow Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Long Term Bond and Arrow Managed Futures, you can compare the effects of market volatilities on Vanguard Long-term 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 Vanguard Long-term with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long-term and Arrow Managed.
Diversification Opportunities for Vanguard Long-term and Arrow Managed
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Arrow is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Bond 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 Vanguard Long-term 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 Vanguard Long Term Bond 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 Vanguard Long-term i.e., Vanguard Long-term and Arrow Managed go up and down completely randomly.
Pair Corralation between Vanguard Long-term and Arrow Managed
Assuming the 90 days horizon Vanguard Long-term is expected to generate 1.19 times less return on investment than Arrow Managed. But when comparing it to its historical volatility, Vanguard Long Term Bond is 1.84 times less risky than Arrow Managed. It trades about 0.04 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 539.00 in Arrow Managed Futures on September 4, 2024 and sell it today you would earn a total of 30.00 from holding Arrow Managed Futures or generate 5.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Long Term Bond vs. Arrow Managed Futures
Performance |
| Timeline |
| Vanguard Long Term |
| Arrow Managed Futures |
Vanguard Long-term and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Long-term and Arrow Managed
The main advantage of trading using opposite Vanguard Long-term and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Long-term 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.| Vanguard Long-term vs. Calvert Global Energy | Vanguard Long-term vs. Fidelity Advisor Energy | Vanguard Long-term vs. Tortoise Energy Independence | Vanguard Long-term vs. Firsthand Alternative Energy |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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