Correlation Between Arrow Electronics and Entergy Louisiana

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

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

Diversification Opportunities for Arrow Electronics and Entergy Louisiana

0.3

Correlation Coefficient

Arrow Electronics  Entergy Louisiana

Weak diversification

The 3 months correlation between Arrow and Entergy is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Entergy Louisiana LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Louisiana LLC 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 Entergy Louisiana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Louisiana LLC has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Entergy Louisiana go up and down completely randomly.

Pair Corralation between Arrow Electronics and Entergy Louisiana

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Entergy Louisiana. In addition to that, Arrow Electronics is 1.88 times more volatile than Entergy Louisiana LLC. It trades about -0.06 of its total potential returns per unit of risk. Entergy Louisiana LLC is currently generating about -0.02 per unit of volatility. If you would invest  2,101  in Entergy Louisiana LLC on December 28, 2024 and sell it today you would lose (24.00) from holding Entergy Louisiana LLC or give up 1.14% of portfolio value over 90 days.

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

Arrow Electronics  vs.  Entergy Louisiana LLC

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.

Entergy Louisiana LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entergy Louisiana LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Entergy Louisiana is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Electronics and Entergy Louisiana

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

The idea behind Arrow Electronics and Entergy Louisiana LLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.