Correlation Between ARROW ELECTRONICS and PT Indosat

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

By analyzing existing cross correlation between ARROW ELECTRONICS and PT Indosat Tbk, you can compare the effects of market volatilities on ARROW ELECTRONICS and PT Indosat 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 PT Indosat. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARROW ELECTRONICS and PT Indosat.

Diversification Opportunities for ARROW ELECTRONICS and PT Indosat

0.47

Correlation Coefficient

ARROW ELECTRONICS  PT Indosat

Very weak diversification

The 3 months correlation between ARROW and IDO1 is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ARROW ELECTRONICS and PT Indosat Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indosat Tbk 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 PT Indosat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indosat Tbk has no effect on the direction of ARROW ELECTRONICS i.e., ARROW ELECTRONICS and PT Indosat go up and down completely randomly.

Pair Corralation between ARROW ELECTRONICS and PT Indosat

Assuming the 90 days trading horizon ARROW ELECTRONICS is expected to under-perform the PT Indosat. But the stock apears to be less risky and, when comparing its historical volatility, ARROW ELECTRONICS is 11.54 times less risky than PT Indosat. The stock trades about -0.14 of its potential returns per unit of risk. The PT Indosat Tbk is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  15.00  in PT Indosat Tbk on December 20, 2024 and sell it today you would lose (8.45) from holding PT Indosat Tbk or give up 56.33% of portfolio value over 90 days.

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

ARROW ELECTRONICS  vs.  PT Indosat Tbk

ARROW ELECTRONICS

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

PT Indosat Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indosat Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with ARROW ELECTRONICS and PT Indosat

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

The idea behind ARROW ELECTRONICS and PT Indosat Tbk 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.