Correlation Between EA Series and Arrow ETF

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

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

Diversification Opportunities for EA Series and Arrow ETF

0.44

Correlation Coefficient

EA Series  Arrow ETF

Very weak diversification

The 3 months correlation between DRAI and Arrow is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Arrow ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow ETF Trust and EA Series 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 EA Series Trust are associated (or correlated) with Arrow ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow ETF Trust has no effect on the direction of EA Series i.e., EA Series and Arrow ETF go up and down completely randomly.

Pair Corralation between EA Series and Arrow ETF

Given the investment horizon of 90 days EA Series Trust is expected to under-perform the Arrow ETF. But the etf apears to be less risky and, when comparing its historical volatility, EA Series Trust is 1.01 times less risky than Arrow ETF. The etf trades about -0.04 of its potential returns per unit of risk. The Arrow ETF Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,148  in Arrow ETF Trust on September 26, 2024 and sell it today you would earn a total of  107.00  from holding Arrow ETF Trust or generate 9.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	24.84%
Values	Daily Returns

EA Series Trust  vs.  Arrow ETF Trust

EA Series Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EA Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, EA Series is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Arrow ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EA Series and Arrow ETF

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

The idea behind EA Series Trust and Arrow ETF Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.