Correlation Between BYD and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both BYD 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 BYD and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Arrow Electronics, you can compare the effects of market volatilities on BYD 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 BYD with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Arrow Electronics.
Diversification Opportunities for BYD and Arrow Electronics
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BYD and Arrow is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and BYD 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 BYD Co 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 BYD i.e., BYD and Arrow Electronics go up and down completely randomly.
Pair Corralation between BYD and Arrow Electronics
Assuming the 90 days trading horizon BYD is expected to generate 1.45 times less return on investment than Arrow Electronics. In addition to that, BYD is 3.85 times more volatile than Arrow Electronics. It trades about 0.03 of its total potential returns per unit of risk. Arrow Electronics is currently generating about 0.14 per unit of volatility. If you would invest 11,480 in Arrow Electronics on October 24, 2024 and sell it today you would earn a total of 459.00 from holding Arrow Electronics or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
BYD Co vs. Arrow Electronics
Performance |
| Timeline |
| BYD Co |
| Arrow Electronics |
BYD and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Arrow Electronics
The main advantage of trading using opposite BYD and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD 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.| BYD vs. LBG Media PLC | BYD vs. Synthomer plc | BYD vs. G5 Entertainment AB | BYD vs. Ecclesiastical Insurance Office |
| Arrow Electronics vs. Target Healthcare REIT | Arrow Electronics vs. Universal Health Services | Arrow Electronics vs. Abingdon Health Plc | Arrow Electronics vs. Bellevue Healthcare Trust |
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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