Correlation Between Arrow Financial and Caravelle International

Can any of the company-specific risk be diversified away by investing in both Arrow Financial and Caravelle International 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 Arrow Financial and Caravelle International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arrow Financial and Caravelle International Group, you can compare the effects of market volatilities on Arrow Financial and Caravelle International 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 Arrow Financial with a short position of Caravelle International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Financial and Caravelle International.

Diversification Opportunities for Arrow Financial and Caravelle International

0.3

Correlation Coefficient

Arrow Financial  Caravelle International

Weak diversification

The 3 months correlation between Arrow and Caravelle is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Caravelle International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravelle International and Arrow Financial 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 Arrow Financial are associated (or correlated) with Caravelle International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravelle International has no effect on the direction of Arrow Financial i.e., Arrow Financial and Caravelle International go up and down completely randomly.

Pair Corralation between Arrow Financial and Caravelle International

Given the investment horizon of 90 days Arrow Financial is expected to generate 0.15 times more return on investment than Caravelle International. However, Arrow Financial is 6.54 times less risky than Caravelle International. It trades about -0.05 of its potential returns per unit of risk. Caravelle International Group is currently generating about -0.1 per unit of risk. If you would invest  2,825  in Arrow Financial on December 29, 2024 and sell it today you would lose (160.00) from holding Arrow Financial or give up 5.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Arrow Financial  vs.  Caravelle International Group

Arrow Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Caravelle International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caravelle International Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Arrow Financial and Caravelle International

The main advantage of trading using opposite Arrow Financial and Caravelle International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Financial position performs unexpectedly, Caravelle International 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 Caravelle International will offset losses from the drop in Caravelle International's long position.

The idea behind Arrow Financial and Caravelle International Group 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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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 Commodity Directory module to find actively traded commodities issued by global exchanges.