Correlation Between Arrow ETF and Invesco CEF

Can any of the company-specific risk be diversified away by investing in both Arrow ETF and Invesco CEF 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 Invesco CEF 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 Invesco CEF Income, you can compare the effects of market volatilities on Arrow ETF and Invesco CEF 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 Invesco CEF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow ETF and Invesco CEF.

Diversification Opportunities for Arrow ETF and Invesco CEF

0.15

Correlation Coefficient

Arrow ETF  Invesco CEF

Average diversification

The 3 months correlation between Arrow and Invesco is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Arrow ETF Trust and Invesco CEF Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco CEF Income 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 Invesco CEF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco CEF Income has no effect on the direction of Arrow ETF i.e., Arrow ETF and Invesco CEF go up and down completely randomly.

Pair Corralation between Arrow ETF and Invesco CEF

Given the investment horizon of 90 days Arrow ETF is expected to generate 1.84 times less return on investment than Invesco CEF. In addition to that, Arrow ETF is 2.12 times more volatile than Invesco CEF Income. It trades about 0.02 of its total potential returns per unit of risk. Invesco CEF Income is currently generating about 0.07 per unit of volatility. If you would invest  1,599  in Invesco CEF Income on October 11, 2024 and sell it today you would earn a total of  337.00  from holding Invesco CEF Income or generate 21.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Arrow ETF Trust  vs.  Invesco CEF Income

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.

Invesco CEF Income

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CEF Income are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Invesco CEF is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arrow ETF and Invesco CEF

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

The idea behind Arrow ETF Trust and Invesco CEF Income 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.