Correlation Between Cementos Pacasmayo and Arrow Electronics

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

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

Diversification Opportunities for Cementos Pacasmayo and Arrow Electronics

0.48

Correlation Coefficient

Cementos Pacasmayo  Arrow Electronics

Very weak diversification

The 3 months correlation between Cementos and Arrow is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cementos Pacasmayo SAA and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Cementos Pacasmayo 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 Cementos Pacasmayo SAA 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 Cementos Pacasmayo i.e., Cementos Pacasmayo and Arrow Electronics go up and down completely randomly.

Pair Corralation between Cementos Pacasmayo and Arrow Electronics

Given the investment horizon of 90 days Cementos Pacasmayo SAA is expected to generate 1.12 times more return on investment than Arrow Electronics. However, Cementos Pacasmayo is 1.12 times more volatile than Arrow Electronics. It trades about 0.02 of its potential returns per unit of risk. Arrow Electronics is currently generating about 0.01 per unit of risk. If you would invest  481.00  in Cementos Pacasmayo SAA on January 19, 2024 and sell it today you would earn a total of  47.00  from holding Cementos Pacasmayo SAA or generate 9.77% return on investment over 90 days.

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

Cementos Pacasmayo SAA  vs.  Arrow Electronics

Cementos Pacasmayo SAA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Arrow Electronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Cementos Pacasmayo and Arrow Electronics

The main advantage of trading using opposite Cementos Pacasmayo and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cementos Pacasmayo 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 Cementos Pacasmayo SAA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.