Correlation Between Corporate Travel and Arrow Electronics

Can any of the company-specific risk be diversified away by investing in both Corporate Travel 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 Corporate Travel and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Corporate Travel Management and Arrow Electronics, you can compare the effects of market volatilities on Corporate Travel 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 Corporate Travel with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Corporate Travel and Arrow Electronics.

Diversification Opportunities for Corporate Travel and Arrow Electronics

-0.48

Correlation Coefficient

Corporate Travel  Arrow Electronics

Very good diversification

The 3 months correlation between Corporate and Arrow is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Travel Management and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Corporate Travel 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 Corporate Travel Management 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 Corporate Travel i.e., Corporate Travel and Arrow Electronics go up and down completely randomly.

Pair Corralation between Corporate Travel and Arrow Electronics

Assuming the 90 days trading horizon Corporate Travel Management is expected to under-perform the Arrow Electronics. In addition to that, Corporate Travel is 1.71 times more volatile than Arrow Electronics. It trades about -0.03 of its total potential returns per unit of risk. Arrow Electronics is currently generating about 0.01 per unit of volatility. If you would invest  10,900  in Arrow Electronics on September 28, 2024 and sell it today you would earn a total of  100.00  from holding Arrow Electronics or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Corporate Travel Management  vs.  Arrow Electronics

Corporate Travel Man

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corporate Travel Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Corporate Travel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Corporate Travel and Arrow Electronics

The main advantage of trading using opposite Corporate Travel and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Corporate Travel 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 Corporate Travel Management 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.