Correlation Between Discipline Fund and Arrow DWA

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

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

Diversification Opportunities for Discipline Fund and Arrow DWA

-0.21

Correlation Coefficient

Discipline Fund  Arrow DWA

Very good diversification

The 3 months correlation between Discipline and Arrow is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Discipline Fund ETF 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 Discipline Fund 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 Discipline Fund ETF 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 Discipline Fund i.e., Discipline Fund and Arrow DWA go up and down completely randomly.

Pair Corralation between Discipline Fund and Arrow DWA

Given the investment horizon of 90 days Discipline Fund ETF is expected to under-perform the Arrow DWA. But the etf apears to be less risky and, when comparing its historical volatility, Discipline Fund ETF is 2.38 times less risky than Arrow DWA. The etf trades about -0.16 of its potential returns per unit of risk. The Arrow DWA Tactical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,153  in Arrow DWA Tactical on September 28, 2024 and sell it today you would earn a total of  24.00  from holding Arrow DWA Tactical or generate 2.08% return on investment over 90 days.

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

Discipline Fund ETF  vs.  Arrow DWA Tactical

Discipline Fund ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Discipline Fund ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Discipline Fund is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Arrow DWA Tactical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow DWA Tactical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arrow DWA is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Discipline Fund and Arrow DWA

The main advantage of trading using opposite Discipline Fund and Arrow DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Discipline Fund 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 Discipline Fund ETF 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.