Correlation Between Climb Global and Arrow Electronics

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

By analyzing existing cross correlation between Climb Global Solutions and Arrow Electronics, you can compare the effects of market volatilities on Climb Global and Arrow Electronics 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 Climb Global with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Climb Global and Arrow Electronics.

Diversification Opportunities for Climb Global and Arrow Electronics

-0.6

Correlation Coefficient

Climb Global  Arrow Electronics

Excellent diversification

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

Pair Corralation between Climb Global and Arrow Electronics

Given the investment horizon of 90 days Climb Global Solutions is expected to generate 1.35 times more return on investment than Arrow Electronics. However, Climb Global is 1.35 times more volatile than Arrow Electronics. It trades about 0.2 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.08 per unit of risk. If you would invest  9,484  in Climb Global Solutions on August 30, 2024 and sell it today you would earn a total of  3,908  from holding Climb Global Solutions or generate 41.21% return on investment over 90 days.

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

Climb Global Solutions  vs.  Arrow Electronics

Climb Global Solutions

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Climb Global Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Climb Global sustained solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady 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.

Pair Trading with Climb Global and Arrow Electronics

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

The idea behind Climb Global Solutions and Arrow Electronics 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.