Correlation Between Plastic Omnium and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Plastic Omnium 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 Plastic Omnium and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plastic Omnium and Arrow Electronics, you can compare the effects of market volatilities on Plastic Omnium 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 Plastic Omnium with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastic Omnium and Arrow Electronics.
Diversification Opportunities for Plastic Omnium and Arrow Electronics
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Plastic and Arrow is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium i.e., Plastic Omnium and Arrow Electronics go up and down completely randomly.
Pair Corralation between Plastic Omnium and Arrow Electronics
Assuming the 90 days trading horizon Plastic Omnium is expected to generate 1.99 times more return on investment than Arrow Electronics. However, Plastic Omnium is 1.99 times more volatile than Arrow Electronics. It trades about 0.14 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.14 per unit of risk. If you would invest 915.00 in Plastic Omnium on September 13, 2024 and sell it today you would earn a total of 82.00 from holding Plastic Omnium or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plastic Omnium vs. Arrow Electronics
Performance |
| Timeline |
| Plastic Omnium |
| Arrow Electronics |
Plastic Omnium and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plastic Omnium and Arrow Electronics
The main advantage of trading using opposite Plastic Omnium and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastic Omnium 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.| Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc | Plastic Omnium vs. Apple Inc |
| Arrow Electronics vs. DICKER DATA LTD | Arrow Electronics vs. KAGA EL LTD | Arrow Electronics vs. Wayside Technology Group |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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