Correlation Between Arrow Electronics and United Utilities
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and United Utilities 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 United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and United Utilities Group, you can compare the effects of market volatilities on Arrow Electronics and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and United Utilities.
Diversification Opportunities for Arrow Electronics and United Utilities
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Arrow and United is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and United Utilities go up and down completely randomly.
Pair Corralation between Arrow Electronics and United Utilities
Assuming the 90 days horizon Arrow Electronics is expected to generate 1.82 times less return on investment than United Utilities. In addition to that, Arrow Electronics is 1.01 times more volatile than United Utilities Group. It trades about 0.02 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.04 per unit of volatility. If you would invest 1,076 in United Utilities Group on September 3, 2024 and sell it today you would earn a total of 274.00 from holding United Utilities Group or generate 25.46% 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. United Utilities Group
Performance |
| Timeline |
| Arrow Electronics |
| United Utilities |
Arrow Electronics and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and United Utilities
The main advantage of trading using opposite Arrow Electronics and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Arrow Electronics vs. DICKER DATA LTD | Arrow Electronics vs. KAGA EL LTD | Arrow Electronics vs. Wayside Technology Group | Arrow Electronics vs. INNELEC MULTIMMINHEO153 |
| United Utilities vs. Guangdong Investment Limited | United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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