Correlation Between EMPEROR ENT and ARROW ELECTRONICS

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

By analyzing existing cross correlation between EMPEROR ENT HOTEL and ARROW ELECTRONICS, you can compare the effects of market volatilities on EMPEROR ENT 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 EMPEROR ENT with a short position of ARROW ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMPEROR ENT and ARROW ELECTRONICS.

Diversification Opportunities for EMPEROR ENT and ARROW ELECTRONICS

0.42

Correlation Coefficient

EMPEROR ENT  ARROW ELECTRONICS

Very weak diversification

The 3 months correlation between EMPEROR and ARROW is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding EMPEROR ENT HOTEL and ARROW ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARROW ELECTRONICS and EMPEROR ENT 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 EMPEROR ENT HOTEL 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 EMPEROR ENT i.e., EMPEROR ENT and ARROW ELECTRONICS go up and down completely randomly.

Pair Corralation between EMPEROR ENT and ARROW ELECTRONICS

Assuming the 90 days trading horizon EMPEROR ENT HOTEL is expected to under-perform the ARROW ELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, EMPEROR ENT HOTEL is 1.55 times less risky than ARROW ELECTRONICS. The stock trades about -0.12 of its potential returns per unit of risk. The ARROW ELECTRONICS is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  12,100  in ARROW ELECTRONICS on October 12, 2024 and sell it today you would lose (1,300) from holding ARROW ELECTRONICS or give up 10.74% of portfolio value over 90 days.

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

EMPEROR ENT HOTEL  vs.  ARROW ELECTRONICS

EMPEROR ENT HOTEL

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days EMPEROR ENT HOTEL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm 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 unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with EMPEROR ENT and ARROW ELECTRONICS

The main advantage of trading using opposite EMPEROR ENT and ARROW ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMPEROR ENT 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's long position.

The idea behind EMPEROR ENT HOTEL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..