Correlation Between United States and ARROW ELECTRONICS

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

By analyzing existing cross correlation between United States Steel and ARROW ELECTRONICS, you can compare the effects of market volatilities on United States 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 United States with a short position of ARROW ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and ARROW ELECTRONICS.

Diversification Opportunities for United States and ARROW ELECTRONICS

-0.38

Correlation Coefficient

United States  ARROW ELECTRONICS

Very good diversification

The 3 months correlation between United and ARROW is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and ARROW ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARROW ELECTRONICS and United States 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 United States Steel 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 United States i.e., United States and ARROW ELECTRONICS go up and down completely randomly.

Pair Corralation between United States and ARROW ELECTRONICS

Assuming the 90 days trading horizon United States is expected to generate 1.4 times less return on investment than ARROW ELECTRONICS. In addition to that, United States is 1.12 times more volatile than ARROW ELECTRONICS. It trades about 0.01 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  11,400  in ARROW ELECTRONICS on September 16, 2024 and sell it today you would earn a total of  0.00  from holding ARROW ELECTRONICS or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United States Steel  vs.  ARROW ELECTRONICS

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The current 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. In spite of comparatively stable basic indicators, ARROW ELECTRONICS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United States and ARROW ELECTRONICS

The main advantage of trading using opposite United States and ARROW ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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's long position.

The idea behind United States Steel 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.