Correlation Between Arrow Electronics and WT Offshore

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

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

Diversification Opportunities for Arrow Electronics and WT Offshore

0.38

Correlation Coefficient

Arrow Electronics  WT Offshore

Weak diversification

The 3 months correlation between Arrow and WTI is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore 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 WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and WT Offshore go up and down completely randomly.

Pair Corralation between Arrow Electronics and WT Offshore

Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.73 times more return on investment than WT Offshore. However, Arrow Electronics is 1.37 times less risky than WT Offshore. It trades about 0.16 of its potential returns per unit of risk. WT Offshore is currently generating about -0.4 per unit of risk. If you would invest  11,490  in Arrow Electronics on September 17, 2024 and sell it today you would earn a total of  540.00  from holding Arrow Electronics or generate 4.7% return on investment over 90 days.

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

Arrow Electronics  vs.  WT Offshore

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 fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Arrow Electronics and WT Offshore

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

The idea behind Arrow Electronics and WT Offshore 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..