Correlation Between Arrow Electronics and MARRIOTT

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

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

Diversification Opportunities for Arrow Electronics and MARRIOTT

-0.42

Correlation Coefficient

Arrow Electronics  MARRIOTT

Very good diversification

The 3 months correlation between Arrow and MARRIOTT is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and MARRIOTT OWNERSHIP RESORTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT OWNERSHIP 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 MARRIOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARRIOTT OWNERSHIP has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and MARRIOTT go up and down completely randomly.

Pair Corralation between Arrow Electronics and MARRIOTT

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the MARRIOTT. In addition to that, Arrow Electronics is 2.26 times more volatile than MARRIOTT OWNERSHIP RESORTS. It trades about -0.3 of its total potential returns per unit of risk. MARRIOTT OWNERSHIP RESORTS is currently generating about -0.2 per unit of volatility. If you would invest  9,722  in MARRIOTT OWNERSHIP RESORTS on October 11, 2024 and sell it today you would lose (199.00) from holding MARRIOTT OWNERSHIP RESORTS or give up 2.05% of portfolio value over 90 days.

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

Arrow Electronics  vs.  MARRIOTT OWNERSHIP RESORTS

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.

MARRIOTT OWNERSHIP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arrow Electronics and MARRIOTT

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

The idea behind Arrow Electronics and MARRIOTT OWNERSHIP RESORTS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.