Correlation Between Avnet and PC Connection

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

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

Diversification Opportunities for Avnet and PC Connection

0.13

Correlation Coefficient

Avnet  PC Connection

Average diversification

The 3 months correlation between Avnet and CNXN is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Avnet Inc and PC Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Connection 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 PC Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Connection has no effect on the direction of Avnet i.e., Avnet and PC Connection go up and down completely randomly.

Pair Corralation between Avnet and PC Connection

Considering the 90-day investment horizon Avnet is expected to generate 1.12 times less return on investment than PC Connection. But when comparing it to its historical volatility, Avnet Inc is 1.19 times less risky than PC Connection. It trades about 0.07 of its potential returns per unit of risk. PC Connection is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,795  in PC Connection on August 9, 2024 and sell it today you would earn a total of  1,735  from holding PC Connection or generate 29.94% return on investment over 90 days.

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

Avnet Inc  vs.  PC Connection

Avnet Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avnet Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Avnet may actually be approaching a critical reversion point that can send shares even higher in December 2024.

PC Connection

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PC Connection are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, PC Connection displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avnet and PC Connection

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

The idea behind Avnet Inc and PC Connection 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.