Correlation Between European Metals and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both European Metals 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 European Metals and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between European Metals Holdings and Arrow Electronics, you can compare the effects of market volatilities on European Metals 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 European Metals with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of European Metals and Arrow Electronics.
Diversification Opportunities for European Metals and Arrow Electronics
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between European and Arrow is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Arrow Electronics go up and down completely randomly.
Pair Corralation between European Metals and Arrow Electronics
Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Arrow Electronics. In addition to that, European Metals is 2.48 times more volatile than Arrow Electronics. It trades about -0.07 of its total potential returns per unit of risk. Arrow Electronics is currently generating about 0.0 per unit of volatility. If you would invest 12,344 in Arrow Electronics on August 24, 2024 and sell it today you would lose (521.00) from holding Arrow Electronics or give up 4.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.76% |
| Values | Daily Returns |
European Metals Holdings vs. Arrow Electronics
Performance |
| Timeline |
| European Metals Holdings |
| Arrow Electronics |
European Metals and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with European Metals and Arrow Electronics
The main advantage of trading using opposite European Metals and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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.| European Metals vs. Synthomer plc | European Metals vs. JB Hunt Transport | European Metals vs. GreenX Metals | European Metals vs. Cizzle Biotechnology Holdings |
| Arrow Electronics vs. Quadrise Plc | Arrow Electronics vs. Intuitive Investments Group | Arrow Electronics vs. European Metals Holdings | Arrow Electronics vs. Athelney Trust plc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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