Correlation Between Arrow Managed and Lazard Short

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

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

Diversification Opportunities for Arrow Managed and Lazard Short

0.7

Correlation Coefficient

Arrow Managed  Lazard Short

Poor diversification

The 3 months correlation between Arrow and Lazard is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures and Lazard Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Short Duration and Arrow Managed 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 Managed Futures are associated (or correlated) with Lazard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Short Duration has no effect on the direction of Arrow Managed i.e., Arrow Managed and Lazard Short go up and down completely randomly.

Pair Corralation between Arrow Managed and Lazard Short

Assuming the 90 days horizon Arrow Managed Futures is expected to under-perform the Lazard Short. In addition to that, Arrow Managed is 11.36 times more volatile than Lazard Short Duration. It trades about -0.02 of its total potential returns per unit of risk. Lazard Short Duration is currently generating about -0.08 per unit of volatility. If you would invest  962.00  in Lazard Short Duration on September 14, 2024 and sell it today you would lose (5.00) from holding Lazard Short Duration or give up 0.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Arrow Managed Futures  vs.  Lazard Short Duration

Arrow Managed Futures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Managed Futures has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Arrow Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lazard Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lazard Short Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Lazard Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Managed and Lazard Short

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

The idea behind Arrow Managed Futures and Lazard Short Duration 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.