Correlation Between Arrow ETF and SPDR SSgA

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

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

Diversification Opportunities for Arrow ETF and SPDR SSgA

0.42

Correlation Coefficient

Arrow ETF  SPDR SSgA

Very weak diversification

The 3 months correlation between Arrow and SPDR is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Arrow ETF Trust and SPDR SSgA Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Global and Arrow ETF 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 ETF Trust are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Global has no effect on the direction of Arrow ETF i.e., Arrow ETF and SPDR SSgA go up and down completely randomly.

Pair Corralation between Arrow ETF and SPDR SSgA

Given the investment horizon of 90 days Arrow ETF Trust is expected to under-perform the SPDR SSgA. In addition to that, Arrow ETF is 1.06 times more volatile than SPDR SSgA Global. It trades about -0.17 of its total potential returns per unit of risk. SPDR SSgA Global is currently generating about -0.05 per unit of volatility. If you would invest  4,536  in SPDR SSgA Global on September 24, 2024 and sell it today you would lose (67.00) from holding SPDR SSgA Global or give up 1.48% of portfolio value over 90 days.

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

Arrow ETF Trust  vs.  SPDR SSgA Global

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR SSgA Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSgA Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR SSgA is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arrow ETF and SPDR SSgA

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

The idea behind Arrow ETF Trust and SPDR SSgA Global 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.