Correlation Between Energy Select and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Energy Select 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 Energy Select and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Select Sector and Arrow Electronics, you can compare the effects of market volatilities on Energy Select 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 Energy Select with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Select and Arrow Electronics.
Diversification Opportunities for Energy Select and Arrow Electronics
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Energy and Arrow is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Energy Select Sector and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Energy Select 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 Energy Select Sector 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 Energy Select i.e., Energy Select and Arrow Electronics go up and down completely randomly.
Pair Corralation between Energy Select and Arrow Electronics
Considering the 90-day investment horizon Energy Select Sector is expected to under-perform the Arrow Electronics. But the etf apears to be less risky and, when comparing its historical volatility, Energy Select Sector is 1.39 times less risky than Arrow Electronics. The etf trades about -0.19 of its potential returns per unit of risk. The Arrow Electronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 12,751 in Arrow Electronics on February 6, 2024 and sell it today you would lose (84.00) from holding Arrow Electronics or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Select Sector vs. Arrow Electronics
Performance |
| Timeline |
| Energy Select Sector |
| Arrow Electronics |
Energy Select and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Select and Arrow Electronics
The main advantage of trading using opposite Energy Select and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Select 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.| Energy Select vs. VanEck Semiconductor ETF | Energy Select vs. Materials Select Sector | Energy Select vs. SPDR SP Metals |
| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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