Correlation Between Arrow Electronics and Synnex

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

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

Diversification Opportunities for Arrow Electronics and Synnex

0.88

Correlation Coefficient

Arrow Electronics  Synnex

Very poor diversification

The 3 months correlation between Arrow and Synnex is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Synnex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synnex 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 Synnex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synnex has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Synnex go up and down completely randomly.

Pair Corralation between Arrow Electronics and Synnex

Considering the 90-day investment horizon Arrow Electronics is expected to generate 2.39 times less return on investment than Synnex. But when comparing it to its historical volatility, Arrow Electronics is 1.1 times less risky than Synnex. It trades about 0.09 of its potential returns per unit of risk. Synnex is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,397  in Synnex on February 4, 2024 and sell it today you would earn a total of  1,364  from holding Synnex or generate 13.12% return on investment over 90 days.

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

Arrow Electronics  vs.  Synnex

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.

Synnex

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synnex are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Synnex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Electronics and Synnex

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

The idea behind Arrow Electronics and Synnex 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.