Correlation Between Federal Realty and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Federal Realty 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 Federal Realty and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Realty Investment and Arrow Electronics, you can compare the effects of market volatilities on Federal Realty 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 Federal Realty with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and Arrow Electronics.
Diversification Opportunities for Federal Realty and Arrow Electronics
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federal and Arrow is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Federal Realty 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 Federal Realty Investment 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 Federal Realty i.e., Federal Realty and Arrow Electronics go up and down completely randomly.
Pair Corralation between Federal Realty and Arrow Electronics
Assuming the 90 days trading horizon Federal Realty Investment is expected to generate 0.51 times more return on investment than Arrow Electronics. However, Federal Realty Investment is 1.96 times less risky than Arrow Electronics. It trades about 0.16 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.02 per unit of risk. If you would invest 9,827 in Federal Realty Investment on August 29, 2024 and sell it today you would earn a total of 1,929 from holding Federal Realty Investment or generate 19.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.9% |
| Values | Daily Returns |
Federal Realty Investment vs. Arrow Electronics
Performance |
| Timeline |
| Federal Realty Investment |
| Arrow Electronics |
Federal Realty and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Realty and Arrow Electronics
The main advantage of trading using opposite Federal Realty and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty 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.| Federal Realty vs. Lendinvest PLC | Federal Realty vs. Neometals | Federal Realty vs. Coor Service Management | Federal Realty vs. Albion Technology General |
| Arrow Electronics vs. Lendinvest PLC | Arrow Electronics vs. Neometals | Arrow Electronics vs. Coor Service Management | Arrow Electronics vs. Albion Technology General |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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