Correlation Between Arrow Electronics and Scientific

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

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

Diversification Opportunities for Arrow Electronics and Scientific

0.33

Correlation Coefficient

Arrow Electronics  Scientific

Weak diversification

The 3 months correlation between Arrow and Scientific is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Scientific Games International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games Int 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 Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games Int has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Scientific go up and down completely randomly.

Pair Corralation between Arrow Electronics and Scientific

Considering the 90-day investment horizon Arrow Electronics is expected to generate 3.2 times more return on investment than Scientific. However, Arrow Electronics is 3.2 times more volatile than Scientific Games International. It trades about 0.0 of its potential returns per unit of risk. Scientific Games International is currently generating about -0.01 per unit of risk. If you would invest  11,545  in Arrow Electronics on October 10, 2024 and sell it today you would lose (336.00) from holding Arrow Electronics or give up 2.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.08%
Values	Daily Returns

Arrow Electronics  vs.  Scientific Games International

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.

Scientific Games Int

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Arrow Electronics and Scientific Games International 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.