Correlation Between Arrow Electronics and XLMedia PLC

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

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

Diversification Opportunities for Arrow Electronics and XLMedia PLC

-0.45

Correlation Coefficient

Arrow Electronics  XLMedia PLC

Very good diversification

The 3 months correlation between Arrow and XLMedia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and XLMedia PLC go up and down completely randomly.

Pair Corralation between Arrow Electronics and XLMedia PLC

Assuming the 90 days trading horizon Arrow Electronics is expected to generate 0.28 times more return on investment than XLMedia PLC. However, Arrow Electronics is 3.63 times less risky than XLMedia PLC. It trades about 0.01 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.0 per unit of risk. If you would invest  11,115  in Arrow Electronics on September 26, 2024 and sell it today you would earn a total of  432.00  from holding Arrow Electronics or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.2%
Values	Daily Returns

Arrow Electronics  vs.  XLMedia PLC

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

XLMedia PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XLMedia PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, XLMedia PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Electronics and XLMedia PLC

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

The idea behind Arrow Electronics and XLMedia PLC 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 Global Correlations module to find global opportunities by holding instruments from different markets.