Correlation Between Arrow Electronics and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and MGP Ingredients 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 MGP Ingredients into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and MGP Ingredients, you can compare the effects of market volatilities on Arrow Electronics and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and MGP Ingredients.
Diversification Opportunities for Arrow Electronics and MGP Ingredients
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Arrow and MGP is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and MGP Ingredients go up and down completely randomly.
Pair Corralation between Arrow Electronics and MGP Ingredients
Assuming the 90 days horizon Arrow Electronics is expected to generate 0.56 times more return on investment than MGP Ingredients. However, Arrow Electronics is 1.78 times less risky than MGP Ingredients. It trades about 0.01 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.07 per unit of risk. If you would invest 11,200 in Arrow Electronics on September 1, 2024 and sell it today you would earn a total of 100.00 from holding Arrow Electronics or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Electronics vs. MGP Ingredients
Performance |
| Timeline |
| Arrow Electronics |
| MGP Ingredients |
Arrow Electronics and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and MGP Ingredients
The main advantage of trading using opposite Arrow Electronics and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Arrow Electronics vs. EEDUCATION ALBERT AB | Arrow Electronics vs. OFFICE DEPOT | Arrow Electronics vs. Xinhua Winshare Publishing | Arrow Electronics vs. CAREER EDUCATION |
| MGP Ingredients vs. ANDREW PELLER LTD | MGP Ingredients vs. NAKED WINES PLC | MGP Ingredients vs. Superior Plus Corp | MGP Ingredients vs. NMI Holdings |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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