Correlation Between Cloudflare and Arrow Electronics

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

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

Diversification Opportunities for Cloudflare and Arrow Electronics

0.89

Correlation Coefficient

Cloudflare  Arrow Electronics

Very poor diversification

The 3 months correlation between Cloudflare and Arrow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cloudflare and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Cloudflare 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 Cloudflare 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 Cloudflare i.e., Cloudflare and Arrow Electronics go up and down completely randomly.

Pair Corralation between Cloudflare and Arrow Electronics

Considering the 90-day investment horizon Cloudflare is expected to generate 2.08 times more return on investment than Arrow Electronics. However, Cloudflare is 2.08 times more volatile than Arrow Electronics. It trades about 0.36 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.18 per unit of risk. If you would invest  12,423  in Cloudflare on May 2, 2025 and sell it today you would earn a total of  8,345  from holding Cloudflare or generate 67.17% return on investment over 90 days.

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

Cloudflare  vs.  Arrow Electronics

Cloudflare

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cloudflare are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Cloudflare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arrow Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Arrow Electronics may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Cloudflare and Arrow Electronics

The main advantage of trading using opposite Cloudflare and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cloudflare 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 Cloudflare 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.