Correlation Between Arrow Electronics and New China
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and New China 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 New China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and New China Life, you can compare the effects of market volatilities on Arrow Electronics and New China 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 New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and New China.
Diversification Opportunities for Arrow Electronics and New China
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arrow and New is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life 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 New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and New China go up and down completely randomly.
Pair Corralation between Arrow Electronics and New China
Assuming the 90 days horizon Arrow Electronics is expected to under-perform the New China. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 1.66 times less risky than New China. The stock trades about -0.11 of its potential returns per unit of risk. The New China Life is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 256.00 in New China Life on August 27, 2024 and sell it today you would earn a total of 20.00 from holding New China Life or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Electronics vs. New China Life
Performance |
| Timeline |
| Arrow Electronics |
| New China Life |
Arrow Electronics and New China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and New China
The main advantage of trading using opposite Arrow Electronics and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, New China 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 New China will offset losses from the drop in New China's long position.| Arrow Electronics vs. Cleanaway Waste Management | Arrow Electronics vs. Coor Service Management | Arrow Electronics vs. Ares Management Corp | Arrow Electronics vs. CEOTRONICS |
| New China vs. Monster Beverage Corp | New China vs. DATAGROUP SE | New China vs. DOCDATA | New China vs. Datadog |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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