Correlation Between AM EAGLE and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both AM EAGLE 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 AM EAGLE and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AM EAGLE OUTFITTERS and Arrow Electronics, you can compare the effects of market volatilities on AM EAGLE 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 AM EAGLE with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and Arrow Electronics.
Diversification Opportunities for AM EAGLE and Arrow Electronics
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AFG and Arrow is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and Arrow Electronics go up and down completely randomly.
Pair Corralation between AM EAGLE and Arrow Electronics
Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 0.88 times more return on investment than Arrow Electronics. However, AM EAGLE OUTFITTERS is 1.14 times less risky than Arrow Electronics. It trades about -0.08 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.16 per unit of risk. If you would invest 1,850 in AM EAGLE OUTFITTERS on August 31, 2024 and sell it today you would lose (100.00) from holding AM EAGLE OUTFITTERS or give up 5.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AM EAGLE OUTFITTERS vs. Arrow Electronics
Performance |
| Timeline |
| AM EAGLE OUTFITTERS |
| Arrow Electronics |
AM EAGLE and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AM EAGLE and Arrow Electronics
The main advantage of trading using opposite AM EAGLE and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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.| AM EAGLE vs. Gaztransport Technigaz SA | AM EAGLE vs. Zoom Video Communications | AM EAGLE vs. BII Railway Transportation | AM EAGLE vs. Warner Music Group |
| Arrow Electronics vs. Nucletron Electronic Aktiengesellschaft | Arrow Electronics vs. American Eagle Outfitters | Arrow Electronics vs. VIAPLAY GROUP AB | Arrow Electronics vs. ELECTRONIC ARTS |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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