Correlation Between First Trust and Arrow Investment

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

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

Diversification Opportunities for First Trust and Arrow Investment

0.67

Correlation Coefficient

First Trust  Arrow Investment

Poor diversification

The 3 months correlation between First and Arrow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Arrow Investment Advisors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Investment Advisors and First Trust 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 First Trust Dorsey are associated (or correlated) with Arrow Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Investment Advisors has no effect on the direction of First Trust i.e., First Trust and Arrow Investment go up and down completely randomly.

Pair Corralation between First Trust and Arrow Investment

Given the investment horizon of 90 days First Trust Dorsey is expected to generate 0.41 times more return on investment than Arrow Investment. However, First Trust Dorsey is 2.43 times less risky than Arrow Investment. It trades about 0.13 of its potential returns per unit of risk. Arrow Investment Advisors is currently generating about -0.13 per unit of risk. If you would invest  2,532  in First Trust Dorsey on May 13, 2025 and sell it today you would earn a total of  165.50  from holding First Trust Dorsey or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	46.03%
Values	Daily Returns

First Trust Dorsey  vs.  Arrow Investment Advisors

First Trust Dorsey

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Arrow Investment Advisors

Risk-Adjusted Performance

Weakest

Over the last 90 days Arrow Investment Advisors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in September 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with First Trust and Arrow Investment

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

The idea behind First Trust Dorsey and Arrow Investment Advisors 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.