Correlation Between ARROW ELECTRONICS and OtelloASA

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

By analyzing existing cross correlation between ARROW ELECTRONICS and Otello ASA, you can compare the effects of market volatilities on ARROW ELECTRONICS and OtelloASA 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 OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARROW ELECTRONICS and OtelloASA.

Diversification Opportunities for ARROW ELECTRONICS and OtelloASA

0.19

Correlation Coefficient

ARROW ELECTRONICS  OtelloASA

Average diversification

The 3 months correlation between ARROW and OtelloASA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding ARROW ELECTRONICS and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA 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 OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of ARROW ELECTRONICS i.e., ARROW ELECTRONICS and OtelloASA go up and down completely randomly.

Pair Corralation between ARROW ELECTRONICS and OtelloASA

Assuming the 90 days trading horizon ARROW ELECTRONICS is expected to generate 0.76 times more return on investment than OtelloASA. However, ARROW ELECTRONICS is 1.32 times less risky than OtelloASA. It trades about -0.13 of its potential returns per unit of risk. Otello ASA is currently generating about -0.18 per unit of risk. If you would invest  11,400  in ARROW ELECTRONICS on September 23, 2024 and sell it today you would lose (400.00) from holding ARROW ELECTRONICS or give up 3.51% of portfolio value over 90 days.

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

ARROW ELECTRONICS  vs.  Otello ASA

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. In spite of comparatively stable basic indicators, ARROW ELECTRONICS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Pair Trading with ARROW ELECTRONICS and OtelloASA

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

The idea behind ARROW ELECTRONICS and Otello ASA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.