Correlation Between Arrow Electronics and AlzChem Group

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

By analyzing existing cross correlation between Arrow Electronics and AlzChem Group AG, you can compare the effects of market volatilities on Arrow Electronics and AlzChem Group 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 AlzChem Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and AlzChem Group.

Diversification Opportunities for Arrow Electronics and AlzChem Group

-0.16

Correlation Coefficient

Arrow Electronics  AlzChem Group

Good diversification

The 3 months correlation between Arrow and AlzChem is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and AlzChem Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AlzChem Group AG 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 AlzChem Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AlzChem Group AG has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and AlzChem Group go up and down completely randomly.

Pair Corralation between Arrow Electronics and AlzChem Group

Assuming the 90 days horizon Arrow Electronics is expected to under-perform the AlzChem Group. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 1.78 times less risky than AlzChem Group. The stock trades about -0.03 of its potential returns per unit of risk. The AlzChem Group AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,120  in AlzChem Group AG on September 20, 2024 and sell it today you would earn a total of  1,760  from holding AlzChem Group AG or generate 42.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Arrow Electronics  vs.  AlzChem Group AG

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.

AlzChem Group AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AlzChem Group AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AlzChem Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Electronics and AlzChem Group

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

The idea behind Arrow Electronics and AlzChem Group AG 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.