Correlation Between Vanguard 500 and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 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 500 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 500 Index and Arrow Managed Futures, you can compare the effects of market volatilities on Vanguard 500 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 500 with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Arrow Managed.
Diversification Opportunities for Vanguard 500 and Arrow Managed
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vanguard and Arrow is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index 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 500 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 500 Index 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 500 i.e., Vanguard 500 and Arrow Managed go up and down completely randomly.
Pair Corralation between Vanguard 500 and Arrow Managed
Assuming the 90 days horizon Vanguard 500 Index is expected to generate about the same return on investment as Arrow Managed Futures. But, Vanguard 500 Index is 3.03 times less risky than Arrow Managed. It trades about -0.06 of its potential returns per unit of risk. Arrow Managed Futures is currently generating about -0.02 per unit of risk. If you would invest 575.00 in Arrow Managed Futures on November 28, 2024 and sell it today you would lose (7.00) from holding Arrow Managed Futures or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard 500 Index vs. Arrow Managed Futures
Performance |
| Timeline |
| Vanguard 500 Index |
| Arrow Managed Futures |
Vanguard 500 and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Arrow Managed
The main advantage of trading using opposite Vanguard 500 and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 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 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| Arrow Managed vs. Us Government Securities | Arrow Managed vs. Inverse Government Long | Arrow Managed vs. John Hancock Government | Arrow Managed vs. Us Government Securities |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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