Correlation Between ENIIM and Arrow Financial

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

By analyzing existing cross correlation between ENIIM 425 09 MAY 29 and Arrow Financial, you can compare the effects of market volatilities on ENIIM and Arrow Financial 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 ENIIM with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENIIM and Arrow Financial.

Diversification Opportunities for ENIIM and Arrow Financial

0.2

Correlation Coefficient

ENIIM  Arrow Financial

Modest diversification

The 3 months correlation between ENIIM and Arrow is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ENIIM 425 09 MAY 29 and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and ENIIM 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 ENIIM 425 09 MAY 29 are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of ENIIM i.e., ENIIM and Arrow Financial go up and down completely randomly.

Pair Corralation between ENIIM and Arrow Financial

Assuming the 90 days trading horizon ENIIM 425 09 MAY 29 is expected to under-perform the Arrow Financial. But the bond apears to be less risky and, when comparing its historical volatility, ENIIM 425 09 MAY 29 is 1.71 times less risky than Arrow Financial. The bond trades about -0.25 of its potential returns per unit of risk. The Arrow Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,803  in Arrow Financial on September 27, 2024 and sell it today you would earn a total of  74.00  from holding Arrow Financial or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	48.44%
Values	Daily Returns

ENIIM 425 09 MAY 29  vs.  Arrow Financial

ENIIM 425 09

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENIIM 425 09 MAY 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for ENIIM 425 09 MAY 29 investors.

Arrow Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ENIIM and Arrow Financial

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

The idea behind ENIIM 425 09 MAY 29 and Arrow Financial 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.