Correlation Between Arrow ETF and IShares Morningstar

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

By analyzing existing cross correlation between Arrow ETF Trust and iShares Morningstar Multi Asset, you can compare the effects of market volatilities on Arrow ETF and IShares Morningstar 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 ETF with a short position of IShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow ETF and IShares Morningstar.

Diversification Opportunities for Arrow ETF and IShares Morningstar

0.9

Correlation Coefficient

Arrow ETF  IShares Morningstar

Almost no diversification

The 3 months correlation between Arrow and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arrow ETF Trust and iShares Morningstar Multi Asse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar and Arrow ETF 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 ETF Trust are associated (or correlated) with IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Arrow ETF i.e., Arrow ETF and IShares Morningstar go up and down completely randomly.

Pair Corralation between Arrow ETF and IShares Morningstar

Given the investment horizon of 90 days Arrow ETF Trust is expected to under-perform the IShares Morningstar. In addition to that, Arrow ETF is 2.11 times more volatile than iShares Morningstar Multi Asset. It trades about -0.37 of its total potential returns per unit of risk. iShares Morningstar Multi Asset is currently generating about -0.19 per unit of volatility. If you would invest  1,988  in iShares Morningstar Multi Asset on October 10, 2024 and sell it today you would lose (29.00) from holding iShares Morningstar Multi Asset or give up 1.46% of portfolio value over 90 days.

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

Arrow ETF Trust  vs.  iShares Morningstar Multi Asse

Arrow ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

iShares Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Morningstar Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, IShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow ETF and IShares Morningstar

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

The idea behind Arrow ETF Trust and iShares Morningstar Multi Asset 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.