Correlation Between Arrow Electronics and Development Technologies

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

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

Diversification Opportunities for Arrow Electronics and Development Technologies

-0.63

Correlation Coefficient

Arrow Electronics  Development Technologies

Excellent diversification

The 3 months correlation between Arrow and Development is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Development Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Technologies 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 Development Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Technologies has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Development Technologies go up and down completely randomly.

Pair Corralation between Arrow Electronics and Development Technologies

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Development Technologies. In addition to that, Arrow Electronics is 2.24 times more volatile than Development Technologies Corp. It trades about -0.08 of its total potential returns per unit of risk. Development Technologies Corp is currently generating about 0.09 per unit of volatility. If you would invest  912.00  in Development Technologies Corp on December 21, 2024 and sell it today you would earn a total of  33.00  from holding Development Technologies Corp or generate 3.62% return on investment over 90 days.

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

Arrow Electronics  vs.  Development Technologies Corp

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 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.

Development Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Development Technologies Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Development Technologies 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 Development Technologies

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

The idea behind Arrow Electronics and Development Technologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.