Correlation Between Carlyle and Arrow Electronics

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

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

Diversification Opportunities for Carlyle and Arrow Electronics

-0.45

Correlation Coefficient

Carlyle  Arrow Electronics

Very good diversification

The 3 months correlation between Carlyle and Arrow is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Carlyle 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 Carlyle Group 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 Carlyle i.e., Carlyle and Arrow Electronics go up and down completely randomly.

Pair Corralation between Carlyle and Arrow Electronics

Allowing for the 90-day total investment horizon Carlyle Group is expected to generate 2.01 times more return on investment than Arrow Electronics. However, Carlyle is 2.01 times more volatile than Arrow Electronics. It trades about 0.01 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.41 per unit of risk. If you would invest  5,274  in Carlyle Group on October 8, 2024 and sell it today you would lose (4.00) from holding Carlyle Group or give up 0.08% of portfolio value over 90 days.

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

Carlyle Group  vs.  Arrow Electronics

Carlyle Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carlyle Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Carlyle reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Carlyle and Arrow Electronics

The main advantage of trading using opposite Carlyle and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle 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 Carlyle Group 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.