Correlation Between Arrow Financial and Smart Digital

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

By analyzing existing cross correlation between Arrow Financial and Smart Digital Group, you can compare the effects of market volatilities on Arrow Financial and Smart Digital 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 Financial with a short position of Smart Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Financial and Smart Digital.

Diversification Opportunities for Arrow Financial and Smart Digital

0.23

Correlation Coefficient

Arrow Financial  Smart Digital

Modest diversification

The 3 months correlation between Arrow and Smart is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Smart Digital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart Digital Group and Arrow Financial 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 Financial are associated (or correlated) with Smart Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart Digital Group has no effect on the direction of Arrow Financial i.e., Arrow Financial and Smart Digital go up and down completely randomly.

Pair Corralation between Arrow Financial and Smart Digital

Given the investment horizon of 90 days Arrow Financial is expected to generate 18.71 times less return on investment than Smart Digital. But when comparing it to its historical volatility, Arrow Financial is 10.02 times less risky than Smart Digital. It trades about 0.13 of its potential returns per unit of risk. Smart Digital Group is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  400.00  in Smart Digital Group on May 1, 2025 and sell it today you would earn a total of  1,955  from holding Smart Digital Group or generate 488.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Arrow Financial  vs.  Smart Digital Group

Arrow Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Arrow Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Smart Digital Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Digital Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Smart Digital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Financial and Smart Digital

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

The idea behind Arrow Financial and Smart Digital Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.