Correlation Between Cal Maine and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Cal Maine 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 Cal Maine and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cal Maine Foods and Arrow Electronics, you can compare the effects of market volatilities on Cal Maine 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 Cal Maine with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Arrow Electronics.
Diversification Opportunities for Cal Maine and Arrow Electronics
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cal and Arrow is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and Arrow Electronics go up and down completely randomly.
Pair Corralation between Cal Maine and Arrow Electronics
Assuming the 90 days trading horizon Cal Maine Foods is expected to generate 0.69 times more return on investment than Arrow Electronics. However, Cal Maine Foods is 1.45 times less risky than Arrow Electronics. It trades about 0.52 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.11 per unit of risk. If you would invest 7,984 in Cal Maine Foods on September 3, 2024 and sell it today you would earn a total of 1,334 from holding Cal Maine Foods or generate 16.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cal Maine Foods vs. Arrow Electronics
Performance |
| Timeline |
| Cal Maine Foods |
| Arrow Electronics |
Cal Maine and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cal Maine and Arrow Electronics
The main advantage of trading using opposite Cal Maine and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine 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.| Cal Maine vs. ADRIATIC METALS LS 013355 | Cal Maine vs. Datang International Power | Cal Maine vs. Science Applications International | Cal Maine vs. Harmony Gold Mining |
| Arrow Electronics vs. KAGA EL LTD | Arrow Electronics vs. Wayside Technology Group | Arrow Electronics vs. INNELEC MULTIMMINHEO153 |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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