Correlation Between Arrow Managed and Mesirow Financial

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

Diversification Opportunities for Arrow Managed and Mesirow Financial

0.02

Correlation Coefficient

Arrow Managed  Mesirow Financial

Significant diversification

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

Pair Corralation between Arrow Managed and Mesirow Financial

Assuming the 90 days horizon Arrow Managed Futures is expected to under-perform the Mesirow Financial. In addition to that, Arrow Managed is 1.22 times more volatile than Mesirow Financial Small. It trades about -0.02 of its total potential returns per unit of risk. Mesirow Financial Small is currently generating about 0.09 per unit of volatility. If you would invest  1,344  in Mesirow Financial Small on September 14, 2024 and sell it today you would earn a total of  76.00  from holding Mesirow Financial Small or generate 5.65% return on investment over 90 days.

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

Arrow Managed Futures  vs.  Mesirow Financial Small

Arrow Managed Futures

Risk-Adjusted Performance

0 of 100

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.

Mesirow Financial Small

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mesirow Financial Small are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Mesirow Financial 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 Mesirow Financial

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

The idea behind Arrow Managed Futures and Mesirow Financial 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.