Correlation Between NET Power and Arrow Electronics

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

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

Diversification Opportunities for NET Power and Arrow Electronics

0.5

Correlation Coefficient

NET Power  Arrow Electronics

Very weak diversification

The 3 months correlation between NET and Arrow is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NET Power and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and NET Power 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 NET Power 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 NET Power i.e., NET Power and Arrow Electronics go up and down completely randomly.

Pair Corralation between NET Power and Arrow Electronics

Given the investment horizon of 90 days NET Power is expected to generate 5.1 times more return on investment than Arrow Electronics. However, NET Power is 5.1 times more volatile than Arrow Electronics. It trades about 0.14 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.0 per unit of risk. If you would invest  162.00  in NET Power on May 15, 2025 and sell it today you would earn a total of  124.00  from holding NET Power or generate 76.54% return on investment over 90 days.

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

NET Power  vs.  Arrow Electronics

NET Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NET Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NET Power reported solid returns over the last few months and may actually be approaching a breakup point.

Arrow Electronics

Risk-Adjusted Performance

Weakest

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with NET Power and Arrow Electronics

The main advantage of trading using opposite NET Power and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NET Power 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 NET Power 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.