Correlation Between Arrow Electronics and REVO INSURANCE

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

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

Diversification Opportunities for Arrow Electronics and REVO INSURANCE

-0.48

Correlation Coefficient

Arrow Electronics  REVO INSURANCE

Very good diversification

The 3 months correlation between Arrow and REVO is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and REVO INSURANCE SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REVO INSURANCE SPA 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 REVO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REVO INSURANCE SPA has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and REVO INSURANCE go up and down completely randomly.

Pair Corralation between Arrow Electronics and REVO INSURANCE

Assuming the 90 days horizon Arrow Electronics is expected to under-perform the REVO INSURANCE. In addition to that, Arrow Electronics is 1.63 times more volatile than REVO INSURANCE SPA. It trades about -0.05 of its total potential returns per unit of risk. REVO INSURANCE SPA is currently generating about 0.31 per unit of volatility. If you would invest  910.00  in REVO INSURANCE SPA on October 1, 2024 and sell it today you would earn a total of  255.00  from holding REVO INSURANCE SPA or generate 28.02% return on investment over 90 days.

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

Arrow Electronics  vs.  REVO INSURANCE SPA

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 weak 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.

REVO INSURANCE SPA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Electronics and REVO INSURANCE

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

The idea behind Arrow Electronics and REVO INSURANCE SPA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.