Correlation Between Arrow Electronics and FEDEX

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

By analyzing existing cross correlation between Arrow Electronics and FEDEX P 42, you can compare the effects of market volatilities on Arrow Electronics and FEDEX 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 FEDEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and FEDEX.

Diversification Opportunities for Arrow Electronics and FEDEX

0.1

Correlation Coefficient

Arrow Electronics  FEDEX

Average diversification

The 3 months correlation between Arrow and FEDEX is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and FEDEX P 42 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEDEX P 42 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 FEDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEDEX P 42 has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and FEDEX go up and down completely randomly.

Pair Corralation between Arrow Electronics and FEDEX

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the FEDEX. In addition to that, Arrow Electronics is 1.19 times more volatile than FEDEX P 42. It trades about -0.11 of its total potential returns per unit of risk. FEDEX P 42 is currently generating about -0.06 per unit of volatility. If you would invest  10,027  in FEDEX P 42 on September 30, 2024 and sell it today you would lose (611.00) from holding FEDEX P 42 or give up 6.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

Arrow Electronics  vs.  FEDEX P 42

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

FEDEX P 42

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEDEX P 42 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FEDEX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Electronics and FEDEX

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

The idea behind Arrow Electronics and FEDEX P 42 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.