Correlation Between Arrow Electronics and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Lake Resources 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 Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Lake Resources NL, you can compare the effects of market volatilities on Arrow Electronics and Lake Resources 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 Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Lake Resources.
Diversification Opportunities for Arrow Electronics and Lake Resources
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arrow and Lake is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Lake Resources go up and down completely randomly.
Pair Corralation between Arrow Electronics and Lake Resources
Considering the 90-day investment horizon Arrow Electronics is expected to generate 1.78 times less return on investment than Lake Resources. But when comparing it to its historical volatility, Arrow Electronics is 5.58 times less risky than Lake Resources. It trades about 0.03 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6.06 in Lake Resources NL on August 29, 2024 and sell it today you would lose (3.06) from holding Lake Resources NL or give up 50.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Electronics vs. Lake Resources NL
Performance |
| Timeline |
| Arrow Electronics |
| Lake Resources NL |
Arrow Electronics and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and Lake Resources
The main advantage of trading using opposite Arrow Electronics and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Lake Resources 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 Lake Resources will offset losses from the drop in Lake Resources' long position.| Arrow Electronics vs. ScanSource | Arrow Electronics vs. ABIVAX Socit Anonyme | Arrow Electronics vs. Pinnacle Sherman Multi Strategy | Arrow Electronics vs. Morningstar Unconstrained Allocation |
| Lake Resources vs. Eastman Kodak Co | Lake Resources vs. Old Dominion Freight | Lake Resources vs. Mesa Air Group | Lake Resources vs. Catalent |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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