Correlation Between Bt Brands and Arrow Electronics

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

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

Diversification Opportunities for Bt Brands and Arrow Electronics

0.34

Correlation Coefficient

Bt Brands  Arrow Electronics

Weak diversification

The 3 months correlation between BTBD and Arrow is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Bt Brands 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 Bt Brands are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Bt Brands i.e., Bt Brands and Arrow Electronics go up and down completely randomly.

Pair Corralation between Bt Brands and Arrow Electronics

Given the investment horizon of 90 days Bt Brands is expected to generate 2.06 times more return on investment than Arrow Electronics. However, Bt Brands is 2.06 times more volatile than Arrow Electronics. It trades about 0.02 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.08 per unit of risk. If you would invest  159.00  in Bt Brands on August 30, 2024 and sell it today you would lose (1.00) from holding Bt Brands or give up 0.63% of portfolio value over 90 days.

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

Bt Brands  vs.  Arrow Electronics

Bt Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bt Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Bt Brands is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 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.

Pair Trading with Bt Brands and Arrow Electronics

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

The idea behind Bt Brands and Arrow Electronics 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.