Correlation Between Arrow Electronics and Global Net

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Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Global Net 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 Electronics and Global Net into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Global Net Lease, you can compare the effects of market volatilities on Arrow Electronics and Global Net 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 Electronics with a short position of Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Global Net.

Diversification Opportunities for Arrow Electronics and Global Net

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Arrow and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease and Arrow Electronics 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 Electronics are associated (or correlated) with Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Global Net go up and down completely randomly.

Pair Corralation between Arrow Electronics and Global Net

Assuming the 90 days trading horizon Arrow Electronics is expected to generate 4.26 times less return on investment than Global Net. But when comparing it to its historical volatility, Arrow Electronics is 3.21 times less risky than Global Net. It trades about 0.01 of its potential returns per unit of risk. Global Net Lease is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,075  in Global Net Lease on October 10, 2024 and sell it today you would lose (335.00) from holding Global Net Lease or give up 31.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.38%
ValuesDaily Returns

Arrow Electronics  vs.  Global Net Lease

 Performance 
       Timeline  
Arrow Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Global Net Lease 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Global Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Arrow Electronics and Global Net Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arrow Electronics and Global Net

The main advantage of trading using opposite Arrow Electronics and Global Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Global Net 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 Global Net will offset losses from the drop in Global Net's long position.
The idea behind Arrow Electronics and Global Net Lease 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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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