Correlation Between Arrow Electronics and Chegg

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Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Chegg 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 Chegg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Chegg Inc, you can compare the effects of market volatilities on Arrow Electronics and Chegg 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 Chegg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Chegg.

Diversification Opportunities for Arrow Electronics and Chegg

-0.26
  Correlation Coefficient

Very good diversification

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

Pair Corralation between Arrow Electronics and Chegg

Assuming the 90 days horizon Arrow Electronics is expected to generate 0.25 times more return on investment than Chegg. However, Arrow Electronics is 3.96 times less risky than Chegg. It trades about -0.31 of its potential returns per unit of risk. Chegg Inc is currently generating about -0.29 per unit of risk. If you would invest  11,600  in Arrow Electronics on October 10, 2024 and sell it today you would lose (900.00) from holding Arrow Electronics or give up 7.76% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Arrow Electronics  vs.  Chegg Inc

 Performance 
       Timeline  
Arrow Electronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Chegg Inc 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Chegg Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Chegg reported solid returns over the last few months and may actually be approaching a breakup point.

Arrow Electronics and Chegg Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arrow Electronics and Chegg

The main advantage of trading using opposite Arrow Electronics and Chegg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Chegg 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 Chegg will offset losses from the drop in Chegg's long position.
The idea behind Arrow Electronics and Chegg Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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