Correlation Between Arrow Electronics and Bayer AG
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Bayer AG 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 Bayer AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Bayer AG, you can compare the effects of market volatilities on Arrow Electronics and Bayer AG 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 Bayer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Bayer AG.
Diversification Opportunities for Arrow Electronics and Bayer AG
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arrow and Bayer is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Bayer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayer AG 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 Bayer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayer AG has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Bayer AG go up and down completely randomly.
Pair Corralation between Arrow Electronics and Bayer AG
Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.76 times more return on investment than Bayer AG. However, Arrow Electronics is 1.32 times less risky than Bayer AG. It trades about 0.02 of its potential returns per unit of risk. Bayer AG is currently generating about -0.08 per unit of risk. If you would invest 10,619 in Arrow Electronics on September 5, 2024 and sell it today you would earn a total of 1,509 from holding Arrow Electronics or generate 14.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.39% |
| Values | Daily Returns |
Arrow Electronics vs. Bayer AG
Performance |
| Timeline |
| Arrow Electronics |
| Bayer AG |
Arrow Electronics and Bayer AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and Bayer AG
The main advantage of trading using opposite Arrow Electronics and Bayer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Bayer AG 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 Bayer AG will offset losses from the drop in Bayer AG's long position.| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. ScanSource | Arrow Electronics vs. PC Connection | Arrow Electronics vs. Aquagold International |
| Bayer AG vs. Jabil Circuit | Bayer AG vs. Dave Busters Entertainment | Bayer AG vs. Bel Fuse A | Bayer AG vs. Arrow Electronics |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |