Correlation Between ARROW ELECTRONICS and Coca-Cola FEMSA
Can any of the company-specific risk be diversified away by investing in both ARROW ELECTRONICS and Coca-Cola FEMSA 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 Coca-Cola FEMSA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ARROW ELECTRONICS and Coca Cola FEMSA SAB, you can compare the effects of market volatilities on ARROW ELECTRONICS and Coca-Cola FEMSA 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 Coca-Cola FEMSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARROW ELECTRONICS and Coca-Cola FEMSA.
Diversification Opportunities for ARROW ELECTRONICS and Coca-Cola FEMSA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ARROW and Coca-Cola is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ARROW ELECTRONICS and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA 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 Coca-Cola FEMSA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola FEMSA has no effect on the direction of ARROW ELECTRONICS i.e., ARROW ELECTRONICS and Coca-Cola FEMSA go up and down completely randomly.
Pair Corralation between ARROW ELECTRONICS and Coca-Cola FEMSA
Assuming the 90 days trading horizon ARROW ELECTRONICS is expected to generate 1.91 times more return on investment than Coca-Cola FEMSA. However, ARROW ELECTRONICS is 1.91 times more volatile than Coca Cola FEMSA SAB. It trades about 0.09 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.06 per unit of risk. If you would invest 10,900 in ARROW ELECTRONICS on September 3, 2024 and sell it today you would earn a total of 400.00 from holding ARROW ELECTRONICS or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ARROW ELECTRONICS vs. Coca Cola FEMSA SAB
Performance |
| Timeline |
| ARROW ELECTRONICS |
| Coca Cola FEMSA |
ARROW ELECTRONICS and Coca-Cola FEMSA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ARROW ELECTRONICS and Coca-Cola FEMSA
The main advantage of trading using opposite ARROW ELECTRONICS and Coca-Cola FEMSA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARROW ELECTRONICS position performs unexpectedly, Coca-Cola FEMSA 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 Coca-Cola FEMSA will offset losses from the drop in Coca-Cola FEMSA's long position.| ARROW ELECTRONICS vs. TOTAL GABON | ARROW ELECTRONICS vs. Walgreens Boots Alliance | ARROW ELECTRONICS vs. Peak Resources Limited |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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