Correlation Between Arrow Electronics, and Telefonaktiebolaget

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

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

Diversification Opportunities for Arrow Electronics, and Telefonaktiebolaget

-0.29

Correlation Coefficient

Arrow Electronics,  Telefonaktiebolaget

Very good diversification

The 3 months correlation between Arrow and Telefonaktiebolaget is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics, and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Arrow Electronics, i.e., Arrow Electronics, and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Arrow Electronics, and Telefonaktiebolaget

Assuming the 90 days trading horizon Arrow Electronics, is expected to under-perform the Telefonaktiebolaget. In addition to that, Arrow Electronics, is 2.55 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.38 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.29 per unit of volatility. If you would invest  2,177  in Telefonaktiebolaget LM Ericsson on December 5, 2024 and sell it today you would earn a total of  233.00  from holding Telefonaktiebolaget LM Ericsson or generate 10.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

Arrow Electronics,  vs.  Telefonaktiebolaget LM Ericsso

Arrow Electronics,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Electronics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Telefonaktiebolaget

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefonaktiebolaget 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 Electronics, and Telefonaktiebolaget

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

The idea behind Arrow Electronics, and Telefonaktiebolaget LM Ericsson 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.