Correlation Between Fast Retailing and Arrow Electronics

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

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

Diversification Opportunities for Fast Retailing and Arrow Electronics

-0.42

Correlation Coefficient

Fast Retailing  Arrow Electronics

Very good diversification

The 3 months correlation between Fast and Arrow is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Arrow Electronics go up and down completely randomly.

Pair Corralation between Fast Retailing and Arrow Electronics

Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Arrow Electronics. In addition to that, Fast Retailing is 1.73 times more volatile than Arrow Electronics. It trades about -0.06 of its total potential returns per unit of risk. Arrow Electronics is currently generating about 0.2 per unit of volatility. If you would invest  11,307  in Arrow Electronics on May 1, 2025 and sell it today you would earn a total of  1,696  from holding Arrow Electronics or generate 15.0% return on investment over 90 days.

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

Fast Retailing Co  vs.  Arrow Electronics

Fast Retailing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Arrow Electronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 15 (%) 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.

Pair Trading with Fast Retailing and Arrow Electronics

The main advantage of trading using opposite Fast Retailing and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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 Fast Retailing Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.