Correlation Between Arrow Managed and State Street
Can any of the company-specific risk be diversified away by investing in both Arrow Managed and State Street 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 State Street 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 State Street Equity, you can compare the effects of market volatilities on Arrow Managed and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Managed and State Street.
Diversification Opportunities for Arrow Managed and State Street
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Arrow and State is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and State Street Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Equity 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Equity has no effect on the direction of Arrow Managed i.e., Arrow Managed and State Street go up and down completely randomly.
Pair Corralation between Arrow Managed and State Street
Assuming the 90 days horizon Arrow Managed Futures is expected to under-perform the State Street. In addition to that, Arrow Managed is 2.32 times more volatile than State Street Equity. It trades about -0.07 of its total potential returns per unit of risk. State Street Equity is currently generating about -0.12 per unit of volatility. If you would invest 44,776 in State Street Equity on December 5, 2024 and sell it today you would lose (1,033) from holding State Street Equity or give up 2.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Arrow Managed Futures vs. State Street Equity
Performance |
Timeline |
Arrow Managed Futures |
State Street Equity |
Arrow Managed and State Street Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Arrow Managed and State Street
The main advantage of trading using opposite Arrow Managed and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Managed position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.Arrow Managed vs. Intermediate Term Bond Fund | Arrow Managed vs. Doubleline Emerging Markets | Arrow Managed vs. Massmutual Premier E | Arrow Managed vs. Barings Active Short |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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