Correlation Between Smart Digital and Arrow Financial

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

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

Diversification Opportunities for Smart Digital and Arrow Financial

0.56

Correlation Coefficient

Smart Digital  Arrow Financial

Very weak diversification

The 3 months correlation between Smart and Arrow is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Smart Digital Group and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Smart Digital 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 Smart Digital Group are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Smart Digital i.e., Smart Digital and Arrow Financial go up and down completely randomly.

Pair Corralation between Smart Digital and Arrow Financial

Considering the 90-day investment horizon Smart Digital Group is expected to generate 10.12 times more return on investment than Arrow Financial. However, Smart Digital is 10.12 times more volatile than Arrow Financial. It trades about 0.15 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.01 per unit of risk. If you would invest  499.00  in Smart Digital Group on May 10, 2025 and sell it today you would earn a total of  541.00  from holding Smart Digital Group or generate 108.42% return on investment over 90 days.

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

Smart Digital Group  vs.  Arrow Financial

Smart Digital Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Digital Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Smart Digital displayed solid returns over the last few months and may actually be approaching a breakup point.

Arrow Financial

Risk-Adjusted Performance

Soft

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Smart Digital and Arrow Financial

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

The idea behind Smart Digital Group and Arrow Financial 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.