Correlation Between Arrow Electronics and Paymentus Holdings

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

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

Diversification Opportunities for Arrow Electronics and Paymentus Holdings

-0.49

Correlation Coefficient

Arrow Electronics  Paymentus Holdings

Very good diversification

The 3 months correlation between Arrow and Paymentus is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Paymentus Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paymentus Holdings 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 Paymentus Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paymentus Holdings has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Paymentus Holdings go up and down completely randomly.

Pair Corralation between Arrow Electronics and Paymentus Holdings

Considering the 90-day investment horizon Arrow Electronics is expected to under-perform the Paymentus Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Arrow Electronics is 2.1 times less risky than Paymentus Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Paymentus Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,273  in Paymentus Holdings on August 30, 2024 and sell it today you would earn a total of  1,536  from holding Paymentus Holdings or generate 67.58% return on investment over 90 days.

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

Arrow Electronics  vs.  Paymentus Holdings

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 latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Paymentus Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paymentus Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Paymentus Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Electronics and Paymentus Holdings

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

The idea behind Arrow Electronics and Paymentus Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.