Correlation Between Arrow Electronics and Belden

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

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

Diversification Opportunities for Arrow Electronics and Belden

0.28

Correlation Coefficient

Arrow Electronics  Belden

Modest diversification

The 3 months correlation between Arrow and Belden is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Belden Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belden Inc 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 Belden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belden Inc has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Belden go up and down completely randomly.

Pair Corralation between Arrow Electronics and Belden

Considering the 90-day investment horizon Arrow Electronics is expected to generate 2.2 times less return on investment than Belden. But when comparing it to its historical volatility, Arrow Electronics is 1.13 times less risky than Belden. It trades about 0.08 of its potential returns per unit of risk. Belden Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,349  in Belden Inc on October 23, 2024 and sell it today you would earn a total of  385.00  from holding Belden Inc or generate 3.39% return on investment over 90 days.

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

Arrow Electronics  vs.  Belden Inc

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 latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Belden Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Belden Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Belden is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Electronics and Belden

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

The idea behind Arrow Electronics and Belden Inc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.