Correlation Between Arrow Electronics and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Smith Douglas 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 Smith Douglas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Smith Douglas Homes, you can compare the effects of market volatilities on Arrow Electronics and Smith Douglas 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 Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Smith Douglas.
Diversification Opportunities for Arrow Electronics and Smith Douglas
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Arrow and Smith is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes 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 Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Smith Douglas go up and down completely randomly.
Pair Corralation between Arrow Electronics and Smith Douglas
Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.6 times more return on investment than Smith Douglas. However, Arrow Electronics is 1.65 times less risky than Smith Douglas. It trades about -0.08 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about -0.12 per unit of risk. If you would invest 12,902 in Arrow Electronics on December 4, 2024 and sell it today you would lose (2,339) from holding Arrow Electronics or give up 18.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Electronics vs. Smith Douglas Homes
Performance |
| Timeline |
| Arrow Electronics |
| Smith Douglas Homes |
Arrow Electronics and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and Smith Douglas
The main advantage of trading using opposite Arrow Electronics and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Smith Douglas 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 Smith Douglas will offset losses from the drop in Smith Douglas' long position.| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
| Smith Douglas vs. Inhibrx | Smith Douglas vs. Nippon Steel Corp | Smith Douglas vs. Acumen Pharmaceuticals | Smith Douglas vs. Summit Environmental |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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