Correlation Between SM Investments and Arrow Electronics

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

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

Diversification Opportunities for SM Investments and Arrow Electronics

0.21

Correlation Coefficient

SM Investments  Arrow Electronics

Modest diversification

The 3 months correlation between SVTMF and Arrow is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and SM Investments 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 SM Investments 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 SM Investments i.e., SM Investments and Arrow Electronics go up and down completely randomly.

Pair Corralation between SM Investments and Arrow Electronics

Assuming the 90 days horizon SM Investments is expected to under-perform the Arrow Electronics. But the pink sheet apears to be less risky and, when comparing its historical volatility, SM Investments is 1.17 times less risky than Arrow Electronics. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Arrow Electronics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  12,978  in Arrow Electronics on June 30, 2025 and sell it today you would lose (886.00) from holding Arrow Electronics or give up 6.83% of portfolio value over 90 days.

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

SM Investments  vs.  Arrow Electronics

SM Investments

Risk-Adjusted Performance

Weakest

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in October 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 SM Investments and Arrow Electronics

The main advantage of trading using opposite SM Investments and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments 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 SM Investments 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.