Correlation Between Arrow DWA and EA Series

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

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

Diversification Opportunities for Arrow DWA and EA Series

0.4

Correlation Coefficient

Arrow DWA  EA Series

Very weak diversification

The 3 months correlation between Arrow and DRAI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arrow DWA Tactical and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust and Arrow DWA 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 DWA Tactical are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Arrow DWA i.e., Arrow DWA and EA Series go up and down completely randomly.

Pair Corralation between Arrow DWA and EA Series

Given the investment horizon of 90 days Arrow DWA Tactical is expected to under-perform the EA Series. But the etf apears to be less risky and, when comparing its historical volatility, Arrow DWA Tactical is 1.78 times less risky than EA Series. The etf trades about -0.08 of its potential returns per unit of risk. The EA Series Trust is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,401  in EA Series Trust on September 28, 2024 and sell it today you would lose (27.00) from holding EA Series Trust or give up 1.12% of portfolio value over 90 days.

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

Arrow DWA Tactical  vs.  EA Series Trust

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.

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.

Pair Trading with Arrow DWA and EA Series

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

The idea behind Arrow DWA Tactical and EA Series 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.