Correlation Between Bel Fuse and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Bel Fuse and Arrow Electronics 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 Bel Fuse and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bel Fuse A and Arrow Electronics, you can compare the effects of market volatilities on Bel Fuse and Arrow Electronics 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 Bel Fuse with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bel Fuse and Arrow Electronics.
Diversification Opportunities for Bel Fuse and Arrow Electronics
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bel and Arrow is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Bel Fuse 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 Bel Fuse A are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Bel Fuse i.e., Bel Fuse and Arrow Electronics go up and down completely randomly.
Pair Corralation between Bel Fuse and Arrow Electronics
Assuming the 90 days horizon Bel Fuse A is expected to generate 1.85 times more return on investment than Arrow Electronics. However, Bel Fuse is 1.85 times more volatile than Arrow Electronics. It trades about 0.08 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.02 per unit of risk. If you would invest 3,415 in Bel Fuse A on August 24, 2024 and sell it today you would earn a total of 6,176 from holding Bel Fuse A or generate 180.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bel Fuse A vs. Arrow Electronics
Performance |
| Timeline |
| Bel Fuse A |
| Arrow Electronics |
Bel Fuse and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bel Fuse and Arrow Electronics
The main advantage of trading using opposite Bel Fuse and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bel Fuse position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.The idea behind Bel Fuse A and Arrow Electronics 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.| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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