Correlation Between Arrow Electronics and Allstate

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

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

Diversification Opportunities for Arrow Electronics and Allstate

-0.52

Correlation Coefficient

Arrow Electronics  Allstate

Excellent diversification

The 3 months correlation between Arrow and Allstate is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate 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 Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Allstate go up and down completely randomly.

Pair Corralation between Arrow Electronics and Allstate

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Allstate. In addition to that, Arrow Electronics is 3.16 times more volatile than The Allstate. It trades about -0.06 of its total potential returns per unit of risk. The Allstate is currently generating about 0.01 per unit of volatility. If you would invest  2,674  in The Allstate on December 29, 2024 and sell it today you would earn a total of  9.00  from holding The Allstate or generate 0.34% 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.  The Allstate

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 fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Allstate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady essential indicators, Allstate is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Arrow Electronics and Allstate

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

The idea behind Arrow Electronics and The Allstate 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.