Correlation Between SPDR SSgA and Arrow ETF

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

By analyzing existing cross correlation between SPDR SSgA Multi Asset and Arrow ETF Trust, you can compare the effects of market volatilities on SPDR SSgA and Arrow ETF 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 SPDR SSgA with a short position of Arrow ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SSgA and Arrow ETF.

Diversification Opportunities for SPDR SSgA and Arrow ETF

0.69

Correlation Coefficient

SPDR SSgA  Arrow ETF

Poor diversification

The 3 months correlation between SPDR and Arrow is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SSgA Multi Asset and Arrow ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow ETF Trust and SPDR SSgA 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 SPDR SSgA Multi Asset are associated (or correlated) with Arrow ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow ETF Trust has no effect on the direction of SPDR SSgA i.e., SPDR SSgA and Arrow ETF go up and down completely randomly.

Pair Corralation between SPDR SSgA and Arrow ETF

Considering the 90-day investment horizon SPDR SSgA is expected to generate 2.57 times less return on investment than Arrow ETF. But when comparing it to its historical volatility, SPDR SSgA Multi Asset is 1.2 times less risky than Arrow ETF. It trades about 0.03 of its potential returns per unit of risk. Arrow ETF Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,256  in Arrow ETF Trust on November 19, 2024 and sell it today you would earn a total of  35.00  from holding Arrow ETF Trust or generate 2.79% return on investment over 90 days.

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

SPDR SSgA Multi Asset  vs.  Arrow ETF Trust

SPDR SSgA Multi

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Multi Asset are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, SPDR SSgA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Arrow ETF Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow ETF Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Arrow ETF is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SPDR SSgA and Arrow ETF

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

The idea behind SPDR SSgA Multi Asset and Arrow ETF Trust 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.