Correlation Between Aldel Financial and Arrow Electronics

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

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

Diversification Opportunities for Aldel Financial and Arrow Electronics

0.26

Correlation Coefficient

Aldel Financial  Arrow Electronics

Modest diversification

The 3 months correlation between Aldel and Arrow is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Aldel Financial 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 Aldel Financial II are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Aldel Financial i.e., Aldel Financial and Arrow Electronics go up and down completely randomly.

Pair Corralation between Aldel Financial and Arrow Electronics

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.08 times more return on investment than Arrow Electronics. However, Aldel Financial II is 12.34 times less risky than Arrow Electronics. It trades about 0.18 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.01 per unit of risk. If you would invest  990.00  in Aldel Financial II on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Aldel Financial II or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	2.62%
Values	Daily Returns

Aldel Financial II  vs.  Arrow Electronics

Aldel Financial II

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Aldel Financial and Arrow Electronics

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

The idea behind Aldel Financial II and Arrow Electronics 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.