Correlation Between Arrow Managed and Asia Pacific

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

Diversification Opportunities for Arrow Managed and Asia Pacific

0.38

Correlation Coefficient

Arrow Managed  Asia Pacific

Weak diversification

The 3 months correlation between Arrow and Asia is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Asia Pacific Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Small 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 Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Small has no effect on the direction of Arrow Managed i.e., Arrow Managed and Asia Pacific go up and down completely randomly.

Pair Corralation between Arrow Managed and Asia Pacific

Assuming the 90 days horizon Arrow Managed Futures is expected to under-perform the Asia Pacific. In addition to that, Arrow Managed is 1.83 times more volatile than Asia Pacific Small. It trades about -0.02 of its total potential returns per unit of risk. Asia Pacific Small is currently generating about 0.07 per unit of volatility. If you would invest  1,668  in Asia Pacific Small on December 20, 2024 and sell it today you would earn a total of  60.00  from holding Asia Pacific Small or generate 3.6% return on investment over 90 days.

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

Arrow Managed Futures  vs.  Asia Pacific Small

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.

Asia Pacific Small

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Small are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Asia Pacific 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 Asia Pacific

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

The idea behind Arrow Managed Futures and Asia Pacific Small 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.