Correlation Between Freeport and Arrow Electronics

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

By analyzing existing cross correlation between Freeport McMoRan 455 percent and Arrow Electronics, you can compare the effects of market volatilities on Freeport 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 Freeport with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Arrow Electronics.

Diversification Opportunities for Freeport and Arrow Electronics

0.13

Correlation Coefficient

Freeport  Arrow Electronics

Average diversification

The 3 months correlation between Freeport and Arrow is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 455 percent and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Freeport 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 Freeport McMoRan 455 percent 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 Freeport i.e., Freeport and Arrow Electronics go up and down completely randomly.

Pair Corralation between Freeport and Arrow Electronics

Assuming the 90 days trading horizon Freeport McMoRan 455 percent is expected to under-perform the Arrow Electronics. But the bond apears to be less risky and, when comparing its historical volatility, Freeport McMoRan 455 percent is 6.4 times less risky than Arrow Electronics. The bond trades about -0.71 of its potential returns per unit of risk. The Arrow Electronics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  11,490  in Arrow Electronics on September 19, 2024 and sell it today you would earn a total of  90.00  from holding Arrow Electronics or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	9.09%
Values	Daily Returns

Freeport McMoRan 455 percent  vs.  Arrow Electronics

Freeport McMoRan 455

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 455 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 Freeport and Arrow Electronics

The main advantage of trading using opposite Freeport and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freeport 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 Freeport McMoRan 455 percent 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.