Correlation Between Avnet and Arrow Electronics

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Can any of the company-specific risk be diversified away by investing in both Avnet 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 Avnet and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avnet Inc and Arrow Electronics, you can compare the effects of market volatilities on Avnet 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 Avnet with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avnet and Arrow Electronics.

Diversification Opportunities for Avnet and Arrow Electronics

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Avnet and Arrow is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Avnet Inc and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Avnet 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 Avnet Inc 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 Avnet i.e., Avnet and Arrow Electronics go up and down completely randomly.

Pair Corralation between Avnet and Arrow Electronics

Considering the 90-day investment horizon Avnet Inc is expected to generate 1.05 times more return on investment than Arrow Electronics. However, Avnet is 1.05 times more volatile than Arrow Electronics. It trades about 0.05 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.03 per unit of risk. If you would invest  4,209  in Avnet Inc on September 8, 2022 and sell it today you would earn a total of  80.00  from holding Avnet Inc or generate 1.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Avnet Inc  vs.  Arrow Electronics

 Performance (%) 
       Timeline  
Avnet Inc 
Avnet Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Avnet Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Avnet is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Avnet Price Channel

Arrow Electronics 
Arrow Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Arrow Price Channel

Avnet and Arrow Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avnet and Arrow Electronics

The main advantage of trading using opposite Avnet and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avnet 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.
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The idea behind Avnet Inc 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.
Arrow Electronics vs. Dupont De Nemours
Arrow Electronics vs. Merck Company
Arrow Electronics vs. 3M Company
Arrow Electronics vs. Procter Gamble
Check out your portfolio center. 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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