Correlation Between Avnet and Synnex

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

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

Diversification Opportunities for Avnet and Synnex

0.81

Correlation Coefficient

Avnet  Synnex

Very poor diversification

The 3 months correlation between Avnet and Synnex is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Avnet Inc and Synnex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synnex and Avnet 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 Avnet Inc 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 Avnet i.e., Avnet and Synnex go up and down completely randomly.

Pair Corralation between Avnet and Synnex

Considering the 90-day investment horizon Avnet Inc is expected to generate 1.34 times more return on investment than Synnex. However, Avnet is 1.34 times more volatile than Synnex. It trades about 0.09 of its potential returns per unit of risk. Synnex is currently generating about 0.03 per unit of risk. If you would invest  4,813  in Avnet Inc on February 4, 2024 and sell it today you would earn a total of  128.00  from holding Avnet Inc or generate 2.66% return on investment over 90 days.

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

Avnet Inc  vs.  Synnex

Avnet Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avnet Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Avnet may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Synnex

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synnex are ranked lower than 14 (%) 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 Avnet and Synnex

The main advantage of trading using opposite Avnet and Synnex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avnet 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 Avnet Inc 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.