Correlation Between Arrow Investment and First Trust

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

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

Diversification Opportunities for Arrow Investment and First Trust

0.41

Correlation Coefficient

Arrow Investment  First Trust

Very weak diversification

The 3 months correlation between Arrow and First is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Investment Advisors and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Arrow Investment 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 Investment Advisors are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Arrow Investment i.e., Arrow Investment and First Trust go up and down completely randomly.

Pair Corralation between Arrow Investment and First Trust

If you would invest  2,235  in Arrow Investment Advisors on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Arrow Investment Advisors or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Arrow Investment Advisors  vs.  First Trust Exchange Traded

Arrow Investment Advisors

Risk-Adjusted Performance

0 of 100

Very Weak

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 comparatively stable basic indicators, Arrow Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, First Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Investment and First Trust

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

The idea behind Arrow Investment Advisors and First Trust Exchange Traded 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.