Correlation Between Arrow Electronics and Arq

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Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Arq 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 Arq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Arq Inc, you can compare the effects of market volatilities on Arrow Electronics and Arq 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 Arq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Arq.

Diversification Opportunities for Arrow Electronics and Arq

ArrowArqDiversified AwayArrowArqDiversified Away100%
0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Arrow and Arq is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Arq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arq Inc 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 Arq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arq Inc has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Arq go up and down completely randomly.

Pair Corralation between Arrow Electronics and Arq

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Arq. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 3.39 times less risky than Arq. The stock trades about 0.0 of its potential returns per unit of risk. The Arq Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  278.00  in Arq Inc on November 27, 2024 and sell it today you would earn a total of  254.00  from holding Arq Inc or generate 91.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Arrow Electronics  vs.  Arq Inc

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15ARW ARQ
       Timeline  
Arrow Electronics 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb105110115120
Arq Inc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Arq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5.566.577.58

Arrow Electronics and Arq Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.21-1.67-1.13-0.59-0.05520.450.991.532.072.61 0.050.100.150.20
JavaScript chart by amCharts 3.21.15ARW ARQ
       Returns  

Pair Trading with Arrow Electronics and Arq

The main advantage of trading using opposite Arrow Electronics and Arq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Arq 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 Arq will offset losses from the drop in Arq's long position.
The idea behind Arrow Electronics and Arq Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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