Correlation Between Universal Technical and Arrow Electronics

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

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

Diversification Opportunities for Universal Technical and Arrow Electronics

0.06

Correlation Coefficient

Universal Technical  Arrow Electronics

Significant diversification

The 3 months correlation between Universal and Arrow is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Universal Technical 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 Universal Technical Institute 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 Universal Technical i.e., Universal Technical and Arrow Electronics go up and down completely randomly.

Pair Corralation between Universal Technical and Arrow Electronics

Considering the 90-day investment horizon Universal Technical is expected to generate 2.38 times less return on investment than Arrow Electronics. In addition to that, Universal Technical is 1.89 times more volatile than Arrow Electronics. It trades about 0.04 of its total potential returns per unit of risk. Arrow Electronics is currently generating about 0.17 per unit of volatility. If you would invest  11,758  in Arrow Electronics on February 15, 2024 and sell it today you would earn a total of  1,143  from holding Arrow Electronics or generate 9.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Universal Technical Institute  vs.  Arrow Electronics

Universal Technical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Universal Technical is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Arrow Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Arrow Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Technical and Arrow Electronics

The main advantage of trading using opposite Universal Technical and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Technical 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 Universal Technical Institute 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 Stocks Directory module to find actively traded stocks across global markets.