Correlation Between Arrow Electronics and GEAR4MUSIC

Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and GEAR4MUSIC 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 GEAR4MUSIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arrow Electronics and GEAR4MUSIC LS 10, you can compare the effects of market volatilities on Arrow Electronics and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and GEAR4MUSIC.

Diversification Opportunities for Arrow Electronics and GEAR4MUSIC

0.47

Correlation Coefficient

Arrow Electronics  GEAR4MUSIC

Very weak diversification

The 3 months correlation between Arrow and GEAR4MUSIC is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and GEAR4MUSIC go up and down completely randomly.

Pair Corralation between Arrow Electronics and GEAR4MUSIC

Assuming the 90 days horizon Arrow Electronics is expected to under-perform the GEAR4MUSIC. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 1.5 times less risky than GEAR4MUSIC. The stock trades about -0.12 of its potential returns per unit of risk. The GEAR4MUSIC LS 10 is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  195.00  in GEAR4MUSIC LS 10 on September 30, 2024 and sell it today you would earn a total of  0.00  from holding GEAR4MUSIC LS 10 or generate 0.0% return on investment over 90 days.

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

Arrow Electronics  vs.  GEAR4MUSIC LS 10

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. 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.

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GEAR4MUSIC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arrow Electronics and GEAR4MUSIC

The main advantage of trading using opposite Arrow Electronics and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.

The idea behind Arrow Electronics and GEAR4MUSIC LS 10 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..