Correlation Between Arrow Electronics and ANTA Sports

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

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

Diversification Opportunities for Arrow Electronics and ANTA Sports

0.6

Correlation Coefficient

Arrow Electronics  ANTA Sports

Poor diversification

The 3 months correlation between Arrow and ANTA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and ANTA Sports Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANTA Sports Products 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 ANTA Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANTA Sports Products has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and ANTA Sports go up and down completely randomly.

Pair Corralation between Arrow Electronics and ANTA Sports

Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.61 times more return on investment than ANTA Sports. However, Arrow Electronics is 1.64 times less risky than ANTA Sports. It trades about 0.01 of its potential returns per unit of risk. ANTA Sports Products is currently generating about -0.01 per unit of risk. If you would invest  11,014  in Arrow Electronics on September 28, 2024 and sell it today you would earn a total of  489.00  from holding Arrow Electronics or generate 4.44% return on investment over 90 days.

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

Arrow Electronics  vs.  ANTA Sports Products

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

ANTA Sports Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANTA Sports Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Arrow Electronics and ANTA Sports

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

The idea behind Arrow Electronics and ANTA Sports Products 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.