Correlation Between Arrow Electronics and Ardelyx

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

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

Diversification Opportunities for Arrow Electronics and Ardelyx

0.58

Correlation Coefficient

Arrow Electronics  Ardelyx

Very weak diversification

The 3 months correlation between Arrow and Ardelyx is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Ardelyx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardelyx 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 Ardelyx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardelyx has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Ardelyx go up and down completely randomly.

Pair Corralation between Arrow Electronics and Ardelyx

Considering the 90-day investment horizon Arrow Electronics is expected to generate 0.46 times more return on investment than Ardelyx. However, Arrow Electronics is 2.15 times less risky than Ardelyx. It trades about -0.13 of its potential returns per unit of risk. Ardelyx is currently generating about -0.07 per unit of risk. If you would invest  13,164  in Arrow Electronics on August 21, 2024 and sell it today you would lose (1,674) from holding Arrow Electronics or give up 12.72% of portfolio value over 90 days.

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

Arrow Electronics  vs.  Ardelyx

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.

Ardelyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardelyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Arrow Electronics and Ardelyx

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

The idea behind Arrow Electronics and Ardelyx 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.

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 the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.