Correlation Between Caffyns PLC and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Caffyns PLC 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 Caffyns PLC and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caffyns PLC and Arrow Electronics, you can compare the effects of market volatilities on Caffyns PLC 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 Caffyns PLC with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caffyns PLC and Arrow Electronics.
Diversification Opportunities for Caffyns PLC and Arrow Electronics
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Caffyns and Arrow is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Caffyns PLC and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Caffyns PLC 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 Caffyns PLC 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 Caffyns PLC i.e., Caffyns PLC and Arrow Electronics go up and down completely randomly.
Pair Corralation between Caffyns PLC and Arrow Electronics
Assuming the 90 days trading horizon Caffyns PLC is expected to generate 0.35 times more return on investment than Arrow Electronics. However, Caffyns PLC is 2.82 times less risky than Arrow Electronics. It trades about -0.21 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.13 per unit of risk. If you would invest 45,000 in Caffyns PLC on August 29, 2024 and sell it today you would lose (2,500) from holding Caffyns PLC or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caffyns PLC vs. Arrow Electronics
Performance |
| Timeline |
| Caffyns PLC |
| Arrow Electronics |
Caffyns PLC and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Caffyns PLC and Arrow Electronics
The main advantage of trading using opposite Caffyns PLC and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caffyns PLC 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.| Caffyns PLC vs. Hansa Investment | Caffyns PLC vs. Diversified Energy | Caffyns PLC vs. Evolution Gaming Group | Caffyns PLC vs. Federal Realty Investment |
| Arrow Electronics vs. Lendinvest PLC | Arrow Electronics vs. Neometals | Arrow Electronics vs. Coor Service Management | Arrow Electronics vs. Albion Technology General |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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