Correlation Between Arrow Electronics and Align Technology

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

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

Diversification Opportunities for Arrow Electronics and Align Technology

0.75

Correlation Coefficient

Arrow Electronics  Align Technology

Poor diversification

The 3 months correlation between Arrow and Align is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Align Technology go up and down completely randomly.

Pair Corralation between Arrow Electronics and Align Technology

Assuming the 90 days horizon Arrow Electronics is expected to generate 0.68 times more return on investment than Align Technology. However, Arrow Electronics is 1.47 times less risky than Align Technology. It trades about 0.21 of its potential returns per unit of risk. Align Technology is currently generating about 0.08 per unit of risk. If you would invest  9,150  in Arrow Electronics on April 20, 2025 and sell it today you would earn a total of  2,050  from holding Arrow Electronics or generate 22.4% return on investment over 90 days.

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

Arrow Electronics  vs.  Align Technology

Arrow Electronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Electronics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arrow Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Align Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Align Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Align Technology may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Arrow Electronics and Align Technology

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

The idea behind Arrow Electronics and Align Technology 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.