Correlation Between Arrow Electronics and Ramaco Resources

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

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

Diversification Opportunities for Arrow Electronics and Ramaco Resources

0.43

Correlation Coefficient

Arrow Electronics  Ramaco Resources

Very weak diversification

The 3 months correlation between Arrow and Ramaco is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources 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 Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Ramaco Resources go up and down completely randomly.

Pair Corralation between Arrow Electronics and Ramaco Resources

Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.44 times more return on investment than Ramaco Resources. However, Arrow Electronics is 2.3 times less risky than Ramaco Resources. It trades about 0.08 of its potential returns per unit of risk. Ramaco Resources is currently generating about -0.14 per unit of risk. If you would invest  11,494  in Arrow Electronics on October 22, 2024 and sell it today you would earn a total of  171.00  from holding Arrow Electronics or generate 1.49% return on investment over 90 days.

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

Arrow Electronics  vs.  Ramaco Resources

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.

Ramaco Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Arrow Electronics and Ramaco Resources

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

The idea behind Arrow Electronics and Ramaco Resources 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.