Correlation Between Arrow Managed and Capital Income

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

Diversification Opportunities for Arrow Managed and Capital Income

-0.49

Correlation Coefficient

Arrow Managed  Capital Income

Very good diversification

The 3 months correlation between Arrow and Capital is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Arrow Managed i.e., Arrow Managed and Capital Income go up and down completely randomly.

Pair Corralation between Arrow Managed and Capital Income

Assuming the 90 days horizon Arrow Managed Futures is expected to generate 2.05 times more return on investment than Capital Income. However, Arrow Managed is 2.05 times more volatile than Capital Income Builder. It trades about -0.01 of its potential returns per unit of risk. Capital Income Builder is currently generating about -0.05 per unit of risk. If you would invest  581.00  in Arrow Managed Futures on October 24, 2024 and sell it today you would lose (10.00) from holding Arrow Managed Futures or give up 1.72% of portfolio value over 90 days.

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

Arrow Managed Futures  vs.  Capital Income Builder

Arrow Managed Futures

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Managed Futures are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Capital Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Capital Income 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 Capital Income

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

The idea behind Arrow Managed Futures and Capital Income Builder 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.