Correlation Between China BlueChemical and Arrow Electronics

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

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

Diversification Opportunities for China BlueChemical and Arrow Electronics

-0.25

Correlation Coefficient

China BlueChemical  Arrow Electronics

Very good diversification

The 3 months correlation between China and Arrow is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and China BlueChemical 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 China BlueChemical 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 China BlueChemical i.e., China BlueChemical and Arrow Electronics go up and down completely randomly.

Pair Corralation between China BlueChemical and Arrow Electronics

Assuming the 90 days horizon China BlueChemical is expected to generate 3.71 times more return on investment than Arrow Electronics. However, China BlueChemical is 3.71 times more volatile than Arrow Electronics. It trades about 0.2 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.16 per unit of risk. If you would invest  24.00  in China BlueChemical on October 22, 2024 and sell it today you would earn a total of  3.00  from holding China BlueChemical or generate 12.5% return on investment over 90 days.

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

China BlueChemical  vs.  Arrow Electronics

China BlueChemical

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China BlueChemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China BlueChemical and Arrow Electronics

The main advantage of trading using opposite China BlueChemical and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China BlueChemical 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 China BlueChemical 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.