Correlation Between Arrow Electronics and Shenandoah Telecommunicatio

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

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

Diversification Opportunities for Arrow Electronics and Shenandoah Telecommunicatio

0.2

Correlation Coefficient

Arrow Electronics  Shenandoah Telecommunicatio

Modest diversification

The 3 months correlation between Arrow and Shenandoah is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Shenandoah Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenandoah Telecommunicatio 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 Shenandoah Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenandoah Telecommunicatio has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Shenandoah Telecommunicatio go up and down completely randomly.

Pair Corralation between Arrow Electronics and Shenandoah Telecommunicatio

Assuming the 90 days horizon Arrow Electronics is expected to under-perform the Shenandoah Telecommunicatio. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 2.0 times less risky than Shenandoah Telecommunicatio. The stock trades about -0.05 of its potential returns per unit of risk. The Shenandoah Telecommunications is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,250  in Shenandoah Telecommunications on October 1, 2024 and sell it today you would lose (10.00) from holding Shenandoah Telecommunications or give up 0.8% of portfolio value over 90 days.

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

Arrow Electronics  vs.  Shenandoah Telecommunications

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Shenandoah Telecommunicatio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenandoah Telecommunications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Shenandoah Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arrow Electronics and Shenandoah Telecommunicatio

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

The idea behind Arrow Electronics and Shenandoah Telecommunications 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.