Correlation Between Arrow Electronics and Legacy Education

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

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

Diversification Opportunities for Arrow Electronics and Legacy Education

-0.62

Correlation Coefficient

Arrow Electronics  Legacy Education

Excellent diversification

The 3 months correlation between Arrow and Legacy is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Legacy Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legacy Education 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 Legacy Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legacy Education has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Legacy Education go up and down completely randomly.

Pair Corralation between Arrow Electronics and Legacy Education

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Legacy Education. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 2.59 times less risky than Legacy Education. The stock trades about -0.09 of its potential returns per unit of risk. The Legacy Education is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  566.00  in Legacy Education on October 22, 2024 and sell it today you would earn a total of  307.00  from holding Legacy Education or generate 54.24% 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.  Legacy Education

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.

Legacy Education

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legacy Education are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Legacy Education showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Electronics and Legacy Education

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

The idea behind Arrow Electronics and Legacy Education 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.