Correlation Between Arrow Electronics and ChannelAdvisor Corp

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

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

Diversification Opportunities for Arrow Electronics and ChannelAdvisor Corp

0.79

Correlation Coefficient

Arrow Electronics  ChannelAdvisor Corp

Poor diversification

The 3 months correlation between Arrow and ChannelAdvisor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and ChannelAdvisor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChannelAdvisor Corp 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 ChannelAdvisor Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChannelAdvisor Corp has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and ChannelAdvisor Corp go up and down completely randomly.

Pair Corralation between Arrow Electronics and ChannelAdvisor Corp

Considering the 90-day investment horizon Arrow Electronics is expected to generate 35.66 times less return on investment than ChannelAdvisor Corp. But when comparing it to its historical volatility, Arrow Electronics is 2.95 times less risky than ChannelAdvisor Corp. It trades about 0.01 of its potential returns per unit of risk. ChannelAdvisor Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,280  in ChannelAdvisor Corp on February 5, 2024 and sell it today you would earn a total of  1,029  from holding ChannelAdvisor Corp or generate 80.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.81%
Values	Daily Returns

Arrow Electronics  vs.  ChannelAdvisor Corp

Arrow Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 11 (%) 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.

ChannelAdvisor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChannelAdvisor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ChannelAdvisor Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Arrow Electronics and ChannelAdvisor Corp

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

The idea behind Arrow Electronics and ChannelAdvisor Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..