Correlation Between Small Cap and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and Arrow Electronics, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Arrow Electronics.
Diversification Opportunities for Small Cap and Arrow Electronics
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Arrow is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Small Cap 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 Small Cap Premium 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 Small Cap i.e., Small Cap and Arrow Electronics go up and down completely randomly.
Pair Corralation between Small Cap and Arrow Electronics
Considering the 90-day investment horizon Small Cap Premium is expected to generate 0.3 times more return on investment than Arrow Electronics. However, Small Cap Premium is 3.32 times less risky than Arrow Electronics. It trades about 0.05 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.1 per unit of risk. If you would invest 2,424 in Small Cap Premium on December 18, 2024 and sell it today you would earn a total of 30.00 from holding Small Cap Premium or generate 1.24% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Premium vs. Arrow Electronics
Performance |
Timeline |
Small Cap Premium |
Arrow Electronics |
Small Cap and Arrow Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Arrow Electronics
The main advantage of trading using opposite Small Cap and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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Check out your portfolio center.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 CEOs Directory module to screen CEOs from public companies around the world.
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