Correlation Between Fastenal and ARROW ELECTRONICS
Can any of the company-specific risk be diversified away by investing in both Fastenal 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 Fastenal and ARROW ELECTRONICS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fastenal Company and ARROW ELECTRONICS, you can compare the effects of market volatilities on Fastenal 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 Fastenal with a short position of ARROW ELECTRONICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fastenal and ARROW ELECTRONICS.
Diversification Opportunities for Fastenal and ARROW ELECTRONICS
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fastenal and ARROW is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and ARROW ELECTRONICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARROW ELECTRONICS and Fastenal 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 Fastenal Company 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 Fastenal i.e., Fastenal and ARROW ELECTRONICS go up and down completely randomly.
Pair Corralation between Fastenal and ARROW ELECTRONICS
Assuming the 90 days horizon Fastenal Company is expected to under-perform the ARROW ELECTRONICS. But the stock apears to be less risky and, when comparing its historical volatility, Fastenal Company is 2.17 times less risky than ARROW ELECTRONICS. The stock trades about -0.23 of its potential returns per unit of risk. The ARROW ELECTRONICS is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 11,000 in ARROW ELECTRONICS on September 13, 2024 and sell it today you would earn a total of 500.00 from holding ARROW ELECTRONICS or generate 4.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fastenal Company vs. ARROW ELECTRONICS
Performance |
| Timeline |
| Fastenal |
| ARROW ELECTRONICS |
Fastenal and ARROW ELECTRONICS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fastenal and ARROW ELECTRONICS
The main advantage of trading using opposite Fastenal and ARROW ELECTRONICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastenal 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's long position.| Fastenal vs. WATSCO INC B | Fastenal vs. Indutrade AB | Fastenal vs. Superior Plus Corp | Fastenal vs. SIVERS SEMICONDUCTORS AB |
| ARROW ELECTRONICS vs. Apple Inc | ARROW ELECTRONICS vs. Apple Inc | ARROW ELECTRONICS vs. Apple Inc | ARROW ELECTRONICS vs. Apple Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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