Correlation Between Arrow Electronics and Lucid

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

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

Diversification Opportunities for Arrow Electronics and Lucid

0.75

Correlation Coefficient

Arrow Electronics  Lucid

Poor diversification

The 3 months correlation between Arrow and Lucid is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group 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 Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Lucid go up and down completely randomly.

Pair Corralation between Arrow Electronics and Lucid

Considering the 90-day investment horizon Arrow Electronics is expected to generate 14.37 times less return on investment than Lucid. But when comparing it to its historical volatility, Arrow Electronics is 2.8 times less risky than Lucid. It trades about 0.07 of its potential returns per unit of risk. Lucid Group is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Lucid Group on September 20, 2024 and sell it today you would earn a total of  66.00  from holding Lucid Group or generate 31.43% return on investment over 90 days.

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

Arrow Electronics  vs.  Lucid Group

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.

Lucid Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Arrow Electronics and Lucid

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

The idea behind Arrow Electronics and Lucid Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.