Correlation Between Arrow Electronics and Global Partners

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

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

Diversification Opportunities for Arrow Electronics and Global Partners

-0.8

Correlation Coefficient

Arrow Electronics  Global Partners

Pay attention - limited upside

The 3 months correlation between Arrow and Global is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Global Partners go up and down completely randomly.

Pair Corralation between Arrow Electronics and Global Partners

Considering the 90-day investment horizon Arrow Electronics is expected to generate 5.03 times less return on investment than Global Partners. In addition to that, Arrow Electronics is 3.92 times more volatile than Global Partners LP. It trades about 0.01 of its total potential returns per unit of risk. Global Partners LP is currently generating about 0.11 per unit of volatility. If you would invest  2,113  in Global Partners LP on October 4, 2024 and sell it today you would earn a total of  501.00  from holding Global Partners LP or generate 23.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Arrow Electronics  vs.  Global Partners LP

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 unsteady 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.

Global Partners LP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Electronics and Global Partners

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

The idea behind Arrow Electronics and Global Partners LP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.