Correlation Between Arrow Electronics and ASM International

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

Diversification Opportunities for Arrow Electronics and ASM International

ArrowASMDiversified AwayArrowASMDiversified Away100%
0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Arrow and ASM is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and ASM International NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASM International 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 ASM International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASM International has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and ASM International go up and down completely randomly.

Pair Corralation between Arrow Electronics and ASM International

Assuming the 90 days horizon Arrow Electronics is expected to generate 0.83 times more return on investment than ASM International. However, Arrow Electronics is 1.2 times less risky than ASM International. It trades about 0.05 of its potential returns per unit of risk. ASM International NV is currently generating about -0.04 per unit of risk. If you would invest  11,100  in Arrow Electronics on September 15, 2024 and sell it today you would earn a total of  600.00  from holding Arrow Electronics or generate 5.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.48%
ValuesDaily Returns

Arrow Electronics  vs.  ASM International NV

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -10-5051015
JavaScript chart by amCharts 3.21.15ARW AVS
       Timeline  
Arrow Electronics 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arrow Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec110115120125
ASM International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ASM International NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASM International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec500520540560580600

Arrow Electronics and ASM International Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.64-4.97-3.31-1.64-0.02781.633.345.066.778.49 0.020.030.040.050.060.070.080.09
JavaScript chart by amCharts 3.21.15ARW AVS
       Returns  

Pair Trading with Arrow Electronics and ASM International

The main advantage of trading using opposite Arrow Electronics and ASM International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, ASM International 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 ASM International will offset losses from the drop in ASM International's long position.
The idea behind Arrow Electronics and ASM International NV 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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