Correlation Between Samsung Electronics and Arrow Electronics

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

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

Diversification Opportunities for Samsung Electronics and Arrow Electronics

0.6

Correlation Coefficient

Samsung Electronics  Arrow Electronics

Poor diversification

The 3 months correlation between Samsung and Arrow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and Arrow Electronics go up and down completely randomly.

Pair Corralation between Samsung Electronics and Arrow Electronics

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Arrow Electronics. In addition to that, Samsung Electronics is 1.12 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 0.01 per unit of volatility. If you would invest  10,500  in Arrow Electronics on October 11, 2024 and sell it today you would earn a total of  400.00  from holding Arrow Electronics or generate 3.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Samsung Electronics Co  vs.  Arrow Electronics

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 unsteady 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 Samsung Electronics and Arrow Electronics

The main advantage of trading using opposite Samsung Electronics and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.