Correlation Between Marfrig Global and Arrow Electronics

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

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

Diversification Opportunities for Marfrig Global and Arrow Electronics

0.58

Correlation Coefficient

Marfrig Global  Arrow Electronics

Very weak diversification

The 3 months correlation between Marfrig and Arrow is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Marfrig Global 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 Marfrig Global Foods 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 Marfrig Global i.e., Marfrig Global and Arrow Electronics go up and down completely randomly.

Pair Corralation between Marfrig Global and Arrow Electronics

Assuming the 90 days horizon Marfrig Global Foods is expected to under-perform the Arrow Electronics. In addition to that, Marfrig Global is 2.31 times more volatile than Arrow Electronics. It trades about -0.08 of its total potential returns per unit of risk. Arrow Electronics is currently generating about -0.1 per unit of volatility. If you would invest  12,920  in Arrow Electronics on February 3, 2024 and sell it today you would lose (435.00) from holding Arrow Electronics or give up 3.37% of portfolio value over 90 days.

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

Marfrig Global Foods  vs.  Arrow Electronics

Marfrig Global Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Marfrig Global may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Arrow Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 10 (%) 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 June 2024.

Pair Trading with Marfrig Global and Arrow Electronics

The main advantage of trading using opposite Marfrig Global and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marfrig Global 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 Marfrig Global Foods 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.