Correlation Between Arrow Electronics and Strategic Education

Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Strategic 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 Strategic 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 Strategic Education, you can compare the effects of market volatilities on Arrow Electronics and Strategic 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 Strategic Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Strategic Education.

Diversification Opportunities for Arrow Electronics and Strategic Education

-0.63

Correlation Coefficient

Arrow Electronics  Strategic Education

Excellent diversification

The 3 months correlation between Arrow and Strategic is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Strategic Education go up and down completely randomly.

Pair Corralation between Arrow Electronics and Strategic Education

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Strategic Education. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 1.33 times less risky than Strategic Education. The stock trades about -0.32 of its potential returns per unit of risk. The Strategic Education is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  9,860  in Strategic Education on October 10, 2024 and sell it today you would lose (678.00) from holding Strategic Education or give up 6.88% of portfolio value over 90 days.

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

Arrow Electronics  vs.  Strategic 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 uncertain 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.

Strategic Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Strategic Education may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arrow Electronics and Strategic Education

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

The idea behind Arrow Electronics and Strategic 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.