Correlation Between Arrow Electronics and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Ebro Foods 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 Arrow Electronics and Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Ebro Foods, you can compare the effects of market volatilities on Arrow Electronics and Ebro Foods 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 Arrow Electronics with a short position of Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Ebro Foods.
Diversification Opportunities for Arrow Electronics and Ebro Foods
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arrow and Ebro is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods and Arrow 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 Arrow Electronics are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Ebro Foods go up and down completely randomly.
Pair Corralation between Arrow Electronics and Ebro Foods
Assuming the 90 days trading horizon Arrow Electronics is expected to generate 1.38 times less return on investment than Ebro Foods. In addition to that, Arrow Electronics is 2.01 times more volatile than Ebro Foods. It trades about 0.01 of its total potential returns per unit of risk. Ebro Foods is currently generating about 0.04 per unit of volatility. If you would invest 1,402 in Ebro Foods on September 3, 2024 and sell it today you would earn a total of 201.00 from holding Ebro Foods or generate 14.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.82% |
| Values | Daily Returns |
Arrow Electronics vs. Ebro Foods
Performance |
| Timeline |
| Arrow Electronics |
| Ebro Foods |
Arrow Electronics and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and Ebro Foods
The main advantage of trading using opposite Arrow Electronics and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| Arrow Electronics vs. Indutrade AB | Arrow Electronics vs. Ameriprise Financial | Arrow Electronics vs. Erste Group Bank | Arrow Electronics vs. Discover Financial Services |
| Ebro Foods vs. Electronic Arts | Ebro Foods vs. Hochschild Mining plc | Ebro Foods vs. Metals Exploration Plc | Ebro Foods vs. Greenroc Mining PLC |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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