Correlation Between Arrow Electronics, and Bio Techne

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

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

Diversification Opportunities for Arrow Electronics, and Bio Techne

0.4

Correlation Coefficient

Arrow Electronics,  Bio Techne

Very weak diversification

The 3 months correlation between Arrow and Bio is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics, and Bio Techne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Techne 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 Bio Techne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Techne has no effect on the direction of Arrow Electronics, i.e., Arrow Electronics, and Bio Techne go up and down completely randomly.

Pair Corralation between Arrow Electronics, and Bio Techne

Assuming the 90 days trading horizon Arrow Electronics, is expected to generate 0.47 times more return on investment than Bio Techne. However, Arrow Electronics, is 2.13 times less risky than Bio Techne. It trades about -0.41 of its potential returns per unit of risk. Bio Techne is currently generating about -0.24 per unit of risk. If you would invest  4,810  in Arrow Electronics, on October 23, 2024 and sell it today you would lose (40.00) from holding Arrow Electronics, or give up 0.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.29%
Values	Daily Returns

Arrow Electronics,  vs.  Bio Techne

Arrow Electronics,

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Arrow Electronics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arrow Electronics, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bio Techne

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bio Techne are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Bio Techne sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Electronics, and Bio Techne

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

The idea behind Arrow Electronics, and Bio Techne 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.