Correlation Between Arrow Electronics and Nuvalent

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

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

Diversification Opportunities for Arrow Electronics and Nuvalent

-0.45

Correlation Coefficient

Arrow Electronics  Nuvalent

Very good diversification

The 3 months correlation between Arrow and Nuvalent is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Arrow Electronics 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 Arrow Electronics are associated (or correlated) with Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Nuvalent go up and down completely randomly.

Pair Corralation between Arrow Electronics and Nuvalent

Considering the 90-day investment horizon Arrow Electronics is expected to generate 2.25 times less return on investment than Nuvalent. But when comparing it to its historical volatility, Arrow Electronics is 1.78 times less risky than Nuvalent. It trades about 0.08 of its potential returns per unit of risk. Nuvalent is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,096  in Nuvalent on January 25, 2024 and sell it today you would earn a total of  1,661  from holding Nuvalent or generate 32.59% return on investment over 90 days.

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

Arrow Electronics  vs.  Nuvalent

Arrow Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Arrow Electronics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Arrow Electronics and Nuvalent

The main advantage of trading using opposite Arrow Electronics and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Nuvalent 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 Nuvalent will offset losses from the drop in Nuvalent's long position.

The idea behind Arrow Electronics and Nuvalent 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..