Correlation Between SUNOCO and Arrow Electronics

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

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

Diversification Opportunities for SUNOCO and Arrow Electronics

0.3

Correlation Coefficient

SUNOCO  Arrow Electronics

Weak diversification

The 3 months correlation between SUNOCO and Arrow is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SUNOCO LOGISTICS PARTNERS and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and SUNOCO 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 SUNOCO LOGISTICS PARTNERS 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 SUNOCO i.e., SUNOCO and Arrow Electronics go up and down completely randomly.

Pair Corralation between SUNOCO and Arrow Electronics

Assuming the 90 days trading horizon SUNOCO LOGISTICS PARTNERS is expected to generate 0.43 times more return on investment than Arrow Electronics. However, SUNOCO LOGISTICS PARTNERS is 2.33 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 -0.03 per unit of risk. If you would invest  9,475  in SUNOCO LOGISTICS PARTNERS on September 4, 2024 and sell it today you would lose (290.00) from holding SUNOCO LOGISTICS PARTNERS or give up 3.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

SUNOCO LOGISTICS PARTNERS  vs.  Arrow Electronics

SUNOCO LOGISTICS PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUNOCO LOGISTICS PARTNERS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SUNOCO is not utilizing all of its potentials. The current 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 fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SUNOCO and Arrow Electronics

The main advantage of trading using opposite SUNOCO and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUNOCO 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 SUNOCO LOGISTICS PARTNERS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.