Correlation Between Arrow Electronics and GENERAL

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

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

Diversification Opportunities for Arrow Electronics and GENERAL

-0.65

Correlation Coefficient

Arrow Electronics  GENERAL

Excellent diversification

The 3 months correlation between Arrow and GENERAL is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and GENERAL ELECTRIC CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELECTRIC 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELECTRIC has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and GENERAL go up and down completely randomly.

Pair Corralation between Arrow Electronics and GENERAL

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the GENERAL. In addition to that, Arrow Electronics is 2.09 times more volatile than GENERAL ELECTRIC CO. It trades about -0.1 of its total potential returns per unit of risk. GENERAL ELECTRIC CO is currently generating about -0.05 per unit of volatility. If you would invest  9,659  in GENERAL ELECTRIC CO on December 22, 2024 and sell it today you would lose (147.00) from holding GENERAL ELECTRIC CO or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	63.33%
Values	Daily Returns

Arrow Electronics  vs.  GENERAL ELECTRIC CO

Arrow Electronics

Risk-Adjusted Performance

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.

GENERAL ELECTRIC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Arrow Electronics and GENERAL

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

The idea behind Arrow Electronics and GENERAL ELECTRIC CO 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.