Correlation Between MARTIN and Arrow Electronics

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

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

Diversification Opportunities for MARTIN and Arrow Electronics

0.73

Correlation Coefficient

MARTIN  Arrow Electronics

Poor diversification

The 3 months correlation between MARTIN and Arrow is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MARTIN MARIETTA MATLS and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and MARTIN 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 MARTIN MARIETTA MATLS 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 MARTIN i.e., MARTIN and Arrow Electronics go up and down completely randomly.

Pair Corralation between MARTIN and Arrow Electronics

Assuming the 90 days trading horizon MARTIN MARIETTA MATLS is expected to generate 0.17 times more return on investment than Arrow Electronics. However, MARTIN MARIETTA MATLS is 5.9 times less risky than Arrow Electronics. It trades about 0.0 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.01 per unit of risk. If you would invest  9,656  in MARTIN MARIETTA MATLS on October 4, 2024 and sell it today you would earn a total of  4.00  from holding MARTIN MARIETTA MATLS or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	57.14%
Values	Daily Returns

MARTIN MARIETTA MATLS  vs.  Arrow Electronics

MARTIN MARIETTA MATLS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MARTIN MARIETTA MATLS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARTIN is not utilizing all of its potentials. The newest 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 unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with MARTIN and Arrow Electronics

The main advantage of trading using opposite MARTIN and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MARTIN 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 MARTIN MARIETTA MATLS 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.