Correlation Between Arrow Electronics and BW Offshore

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

By analyzing existing cross correlation between Arrow Electronics and BW Offshore, you can compare the effects of market volatilities on Arrow Electronics and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and BW Offshore.

Diversification Opportunities for Arrow Electronics and BW Offshore

0.54

Correlation Coefficient

Arrow Electronics  BW Offshore

Very weak diversification

The 3 months correlation between Arrow and 0RKH is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and BW Offshore go up and down completely randomly.

Pair Corralation between Arrow Electronics and BW Offshore

Assuming the 90 days trading horizon Arrow Electronics is expected to generate 11.17 times less return on investment than BW Offshore. But when comparing it to its historical volatility, Arrow Electronics is 1.7 times less risky than BW Offshore. It trades about 0.01 of its potential returns per unit of risk. BW Offshore is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,135  in BW Offshore on October 5, 2024 and sell it today you would earn a total of  968.00  from holding BW Offshore or generate 45.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.96%
Values	Daily Returns

Arrow Electronics  vs.  BW Offshore

Arrow Electronics

Risk-Adjusted Performance

0 of 100

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 unsteady 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.

BW Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BW Offshore is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arrow Electronics and BW Offshore

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

The idea behind Arrow Electronics and BW Offshore 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.