Correlation Between Arrow Electronics and Ameritrans Capital

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

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

Diversification Opportunities for Arrow Electronics and Ameritrans Capital

0.47

Correlation Coefficient

Arrow Electronics  Ameritrans Capital

Very weak diversification

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

Pair Corralation between Arrow Electronics and Ameritrans Capital

Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.06 times more return on investment than Ameritrans Capital. However, Arrow Electronics is 17.69 times less risky than Ameritrans Capital. It trades about -0.32 of its potential returns per unit of risk. Ameritrans Capital Corp is currently generating about -0.22 per unit of risk. If you would invest  12,244  in Arrow Electronics on October 9, 2024 and sell it today you would lose (898.00) from holding Arrow Electronics or give up 7.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Arrow Electronics  vs.  Ameritrans Capital Corp

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ameritrans Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameritrans Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Preferred Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Arrow Electronics and Ameritrans Capital

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

The idea behind Arrow Electronics and Ameritrans Capital Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.