Correlation Between Analog Devices and Arrow Financial

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

By analyzing existing cross correlation between Analog Devices and Arrow Financial, you can compare the effects of market volatilities on Analog Devices and Arrow Financial 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 Analog Devices with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Arrow Financial.

Diversification Opportunities for Analog Devices and Arrow Financial

-0.22

Correlation Coefficient

Analog Devices  Arrow Financial

Very good diversification

The 3 months correlation between Analog and Arrow is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Analog Devices 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 Analog Devices are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Analog Devices i.e., Analog Devices and Arrow Financial go up and down completely randomly.

Pair Corralation between Analog Devices and Arrow Financial

Considering the 90-day investment horizon Analog Devices is expected to generate 0.75 times more return on investment than Arrow Financial. However, Analog Devices is 1.34 times less risky than Arrow Financial. It trades about 0.03 of its potential returns per unit of risk. Arrow Financial is currently generating about -0.33 per unit of risk. If you would invest  21,631  in Analog Devices on October 17, 2024 and sell it today you would earn a total of  191.00  from holding Analog Devices or generate 0.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Analog Devices  vs.  Arrow Financial

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Arrow Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Analog Devices and Arrow Financial

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

The idea behind Analog Devices and Arrow Financial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.