Correlation Between Arrow Electronics, and Ford

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

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

Diversification Opportunities for Arrow Electronics, and Ford

-0.68

Correlation Coefficient

Arrow Electronics,  Ford

Excellent diversification

The 3 months correlation between Arrow and Ford is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics, and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor and Arrow Electronics, 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 Arrow Electronics, are associated (or correlated) with Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Arrow Electronics, i.e., Arrow Electronics, and Ford go up and down completely randomly.

Pair Corralation between Arrow Electronics, and Ford

Assuming the 90 days trading horizon Arrow Electronics, is expected to generate 2.15 times less return on investment than Ford. But when comparing it to its historical volatility, Arrow Electronics, is 1.65 times less risky than Ford. It trades about 0.05 of its potential returns per unit of risk. Ford Motor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,898  in Ford Motor on September 14, 2024 and sell it today you would earn a total of  378.00  from holding Ford Motor or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

Arrow Electronics,  vs.  Ford Motor

Arrow Electronics,

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics, are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Arrow Electronics, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ford Motor

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arrow Electronics, and Ford

The main advantage of trading using opposite Arrow Electronics, and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics, position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.

The idea behind Arrow Electronics, and Ford Motor 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 Stocks Directory module to find actively traded stocks across global markets.