Correlation Between Arrow Electronics and Empire Global

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

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

Diversification Opportunities for Arrow Electronics and Empire Global

0.0

Correlation Coefficient

Arrow Electronics  Empire Global

Pay attention - limited upside

The 3 months correlation between Arrow and Empire is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Empire Global Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Global Gaming 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 Empire Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Global Gaming has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Empire Global go up and down completely randomly.

Pair Corralation between Arrow Electronics and Empire Global

Considering the 90-day investment horizon Arrow Electronics is expected to generate 80.73 times less return on investment than Empire Global. But when comparing it to its historical volatility, Arrow Electronics is 13.13 times less risky than Empire Global. It trades about 0.01 of its potential returns per unit of risk. Empire Global Gaming is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Empire Global Gaming on February 5, 2024 and sell it today you would lose (3.47) from holding Empire Global Gaming or give up 99.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Arrow Electronics  vs.  Empire Global Gaming

Arrow Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Arrow Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Empire Global Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Global Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Empire Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arrow Electronics and Empire Global

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

The idea behind Arrow Electronics and Empire Global Gaming 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .