Correlation Between Arrow Managed and Invesco Asia

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

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

Diversification Opportunities for Arrow Managed and Invesco Asia

0.02

Correlation Coefficient

Arrow Managed  Invesco Asia

Significant diversification

The 3 months correlation between Arrow and Invesco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Invesco Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Asia Pacific and Arrow Managed 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 Managed Futures are associated (or correlated) with Invesco Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Asia Pacific has no effect on the direction of Arrow Managed i.e., Arrow Managed and Invesco Asia go up and down completely randomly.

Pair Corralation between Arrow Managed and Invesco Asia

Assuming the 90 days horizon Arrow Managed Futures is expected to under-perform the Invesco Asia. In addition to that, Arrow Managed is 1.66 times more volatile than Invesco Asia Pacific. It trades about -0.04 of its total potential returns per unit of risk. Invesco Asia Pacific is currently generating about -0.02 per unit of volatility. If you would invest  2,764  in Invesco Asia Pacific on December 21, 2024 and sell it today you would lose (33.00) from holding Invesco Asia Pacific or give up 1.19% of portfolio value over 90 days.

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

Arrow Managed Futures  vs.  Invesco Asia Pacific

Arrow Managed Futures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Managed Futures has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Arrow Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Asia Pacific

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Asia Pacific has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Managed and Invesco Asia

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

The idea behind Arrow Managed Futures and Invesco Asia Pacific 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.