Correlation Between Digilife Technologies and ARROW ELECTRONICS

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

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

Diversification Opportunities for Digilife Technologies and ARROW ELECTRONICS

0.03

Correlation Coefficient

Digilife Technologies  ARROW ELECTRONICS

Significant diversification

The 3 months correlation between Digilife and ARROW is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Digilife Technologies Limited and ARROW ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARROW ELECTRONICS and Digilife Technologies 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 Digilife Technologies Limited 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 Digilife Technologies i.e., Digilife Technologies and ARROW ELECTRONICS go up and down completely randomly.

Pair Corralation between Digilife Technologies and ARROW ELECTRONICS

Assuming the 90 days trading horizon Digilife Technologies is expected to generate 4.07 times less return on investment than ARROW ELECTRONICS. In addition to that, Digilife Technologies is 2.53 times more volatile than ARROW ELECTRONICS. It trades about 0.02 of its total potential returns per unit of risk. ARROW ELECTRONICS is currently generating about 0.22 per unit of volatility. If you would invest  10,800  in ARROW ELECTRONICS on September 14, 2024 and sell it today you would earn a total of  900.00  from holding ARROW ELECTRONICS or generate 8.33% return on investment over 90 days.

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

Digilife Technologies Limited  vs.  ARROW ELECTRONICS

Digilife Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Digilife Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ARROW ELECTRONICS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARROW ELECTRONICS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ARROW ELECTRONICS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Digilife Technologies and ARROW ELECTRONICS

The main advantage of trading using opposite Digilife Technologies and ARROW ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digilife Technologies 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 Digilife Technologies Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.