Correlation Between Arrow Electronics and BIOGEN

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

By analyzing existing cross correlation between Arrow Electronics and BIOGEN INC 52, you can compare the effects of market volatilities on Arrow Electronics and BIOGEN 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 BIOGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and BIOGEN.

Diversification Opportunities for Arrow Electronics and BIOGEN

0.36

Correlation Coefficient

Arrow Electronics  BIOGEN

Weak diversification

The 3 months correlation between Arrow and BIOGEN is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and BIOGEN INC 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIOGEN INC 52 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 BIOGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIOGEN INC 52 has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and BIOGEN go up and down completely randomly.

Pair Corralation between Arrow Electronics and BIOGEN

Considering the 90-day investment horizon Arrow Electronics is expected to generate 1.81 times more return on investment than BIOGEN. However, Arrow Electronics is 1.81 times more volatile than BIOGEN INC 52. It trades about -0.02 of its potential returns per unit of risk. BIOGEN INC 52 is currently generating about -0.05 per unit of risk. If you would invest  12,753  in Arrow Electronics on September 14, 2024 and sell it today you would lose (551.00) from holding Arrow Electronics or give up 4.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Arrow Electronics  vs.  BIOGEN INC 52

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 fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

BIOGEN INC 52

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIOGEN INC 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BIOGEN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Electronics and BIOGEN

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

The idea behind Arrow Electronics and BIOGEN INC 52 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.