Correlation Between Global E and Arrow Electronics

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

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

Diversification Opportunities for Global E and Arrow Electronics

-0.56

Correlation Coefficient

Global E  Arrow Electronics

Excellent diversification

The 3 months correlation between Global and Arrow is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Global E 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 Global E Online 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 Global E i.e., Global E and Arrow Electronics go up and down completely randomly.

Pair Corralation between Global E and Arrow Electronics

Given the investment horizon of 90 days Global E is expected to generate 1.77 times less return on investment than Arrow Electronics. In addition to that, Global E is 1.3 times more volatile than Arrow Electronics. It trades about 0.07 of its total potential returns per unit of risk. Arrow Electronics is currently generating about 0.17 per unit of volatility. If you would invest  11,503  in Arrow Electronics on October 27, 2024 and sell it today you would earn a total of  417.00  from holding Arrow Electronics or generate 3.63% return on investment over 90 days.

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

Global E Online  vs.  Arrow Electronics

Global E Online

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Global E exhibited 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 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 Global E and Arrow Electronics

The main advantage of trading using opposite Global E and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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 Global E Online 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.