Correlation Between Mondrian Emerging and Arrow Managed

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

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

Diversification Opportunities for Mondrian Emerging and Arrow Managed

-0.16

Correlation Coefficient

Mondrian Emerging  Arrow Managed

Good diversification

The 3 months correlation between Mondrian and Arrow is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mondrian Emerging Markets and Arrow Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Managed Futures and Mondrian Emerging 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 Mondrian Emerging Markets are associated (or correlated) with Arrow Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Managed Futures has no effect on the direction of Mondrian Emerging i.e., Mondrian Emerging and Arrow Managed go up and down completely randomly.

Pair Corralation between Mondrian Emerging and Arrow Managed

Assuming the 90 days horizon Mondrian Emerging Markets is expected to under-perform the Arrow Managed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mondrian Emerging Markets is 1.27 times less risky than Arrow Managed. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Arrow Managed Futures is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  557.00  in Arrow Managed Futures on September 3, 2024 and sell it today you would earn a total of  1.00  from holding Arrow Managed Futures or generate 0.18% return on investment over 90 days.

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

Mondrian Emerging Markets  vs.  Arrow Managed Futures

Mondrian Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Mondrian Emerging and Arrow Managed

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

The idea behind Mondrian Emerging Markets and Arrow Managed Futures 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.