Correlation Between EMCOR and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both EMCOR 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 EMCOR and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCOR Group and Arrow Electronics, you can compare the effects of market volatilities on EMCOR 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 EMCOR with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCOR and Arrow Electronics.
Diversification Opportunities for EMCOR and Arrow Electronics
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EMCOR and Arrow is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR Group and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and EMCOR 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 EMCOR Group 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 EMCOR i.e., EMCOR and Arrow Electronics go up and down completely randomly.
Pair Corralation between EMCOR and Arrow Electronics
Considering the 90-day investment horizon EMCOR Group is expected to generate 1.19 times more return on investment than Arrow Electronics. However, EMCOR is 1.19 times more volatile than Arrow Electronics. It trades about 0.19 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.01 per unit of risk. If you would invest 21,186 in EMCOR Group on September 2, 2024 and sell it today you would earn a total of 29,826 from holding EMCOR Group or generate 140.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCOR Group vs. Arrow Electronics
Performance |
| Timeline |
| EMCOR Group |
| Arrow Electronics |
EMCOR and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCOR and Arrow Electronics
The main advantage of trading using opposite EMCOR and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR 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 EMCOR Group 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. Avnet Inc | Arrow Electronics vs. Synnex | Arrow Electronics vs. Ingram Micro Holding | Arrow Electronics vs. Insight Enterprises |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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