Correlation Between Davis Real and Arrow Managed

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

By analyzing existing cross correlation between Davis Real Estate and Arrow Managed Futures, you can compare the effects of market volatilities on Davis Real 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 Davis Real with a short position of Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Real and Arrow Managed.

Diversification Opportunities for Davis Real and Arrow Managed

-0.46

Correlation Coefficient

Davis Real  Arrow Managed

Very good diversification

The 3 months correlation between Davis and Arrow is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Davis Real Estate 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 Davis Real 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 Davis Real Estate 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 Davis Real i.e., Davis Real and Arrow Managed go up and down completely randomly.

Pair Corralation between Davis Real and Arrow Managed

Assuming the 90 days horizon Davis Real is expected to generate 2.5 times less return on investment than Arrow Managed. But when comparing it to its historical volatility, Davis Real Estate is 1.29 times less risky than Arrow Managed. It trades about 0.01 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  550.00  in Arrow Managed Futures on October 15, 2024 and sell it today you would earn a total of  42.00  from holding Arrow Managed Futures or generate 7.64% return on investment over 90 days.

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

Davis Real Estate  vs.  Arrow Managed Futures

Davis Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davis Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Arrow Managed Futures

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Managed Futures are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Arrow Managed may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Davis Real and Arrow Managed

The main advantage of trading using opposite Davis Real and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Real 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 Davis Real Estate 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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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.