Correlation Between Barings Active and Arrow Dwa

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

By analyzing existing cross correlation between Barings Active Short and Arrow Dwa Tactical, you can compare the effects of market volatilities on Barings Active and Arrow Dwa 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 Barings Active with a short position of Arrow Dwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Active and Arrow Dwa.

Diversification Opportunities for Barings Active and Arrow Dwa

0.53

Correlation Coefficient

Barings Active  Arrow Dwa

Very weak diversification

The 3 months correlation between Barings and Arrow is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and Arrow Dwa Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Dwa Tactical and Barings Active 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 Barings Active Short are associated (or correlated) with Arrow Dwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Dwa Tactical has no effect on the direction of Barings Active i.e., Barings Active and Arrow Dwa go up and down completely randomly.

Pair Corralation between Barings Active and Arrow Dwa

Assuming the 90 days horizon Barings Active is expected to generate 8.86 times less return on investment than Arrow Dwa. But when comparing it to its historical volatility, Barings Active Short is 4.81 times less risky than Arrow Dwa. It trades about 0.1 of its potential returns per unit of risk. Arrow Dwa Tactical is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  930.00  in Arrow Dwa Tactical on September 12, 2024 and sell it today you would earn a total of  64.00  from holding Arrow Dwa Tactical or generate 6.88% return on investment over 90 days.

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

Barings Active Short  vs.  Arrow Dwa Tactical

Barings Active Short

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Active Short are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Barings Active is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arrow Dwa Tactical

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Dwa Tactical are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Arrow Dwa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barings Active and Arrow Dwa

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

The idea behind Barings Active Short and Arrow Dwa Tactical 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..