Correlation Between Arrow Electronics and KINDER

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

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

Diversification Opportunities for Arrow Electronics and KINDER

0.54

Correlation Coefficient

Arrow Electronics  KINDER

Very weak diversification

The 3 months correlation between Arrow and KINDER is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and KINDER MORGAN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN INC 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN INC has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and KINDER go up and down completely randomly.

Pair Corralation between Arrow Electronics and KINDER

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the KINDER. In addition to that, Arrow Electronics is 7.0 times more volatile than KINDER MORGAN INC. It trades about -0.12 of its total potential returns per unit of risk. KINDER MORGAN INC is currently generating about -0.08 per unit of volatility. If you would invest  9,953  in KINDER MORGAN INC on October 8, 2024 and sell it today you would lose (146.00) from holding KINDER MORGAN INC or give up 1.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Arrow Electronics  vs.  KINDER MORGAN INC

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.

KINDER MORGAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER 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 KINDER

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

The idea behind Arrow Electronics and KINDER MORGAN INC 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.