Correlation Between Arrow Electronics and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Arrow Electronics and Electronic Arts 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 Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arrow Electronics and Electronic Arts, you can compare the effects of market volatilities on Arrow Electronics and Electronic Arts 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 Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arrow Electronics and Electronic Arts.
Diversification Opportunities for Arrow Electronics and Electronic Arts
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Arrow and Electronic is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts 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 Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Electronic Arts go up and down completely randomly.
Pair Corralation between Arrow Electronics and Electronic Arts
Assuming the 90 days trading horizon Arrow Electronics is expected to under-perform the Electronic Arts. In addition to that, Arrow Electronics is 3.66 times more volatile than Electronic Arts. It trades about -0.11 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.69 per unit of volatility. If you would invest 14,421 in Electronic Arts on August 27, 2024 and sell it today you would earn a total of 2,041 from holding Electronic Arts or generate 14.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arrow Electronics vs. Electronic Arts
Performance |
| Timeline |
| Arrow Electronics |
| Electronic Arts |
Arrow Electronics and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arrow Electronics and Electronic Arts
The main advantage of trading using opposite Arrow Electronics and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Electronics position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| Arrow Electronics vs. Samsung Electronics Co | Arrow Electronics vs. Samsung Electronics Co | Arrow Electronics vs. Hyundai Motor | Arrow Electronics vs. Toyota Motor Corp |
| Electronic Arts vs. AMG Advanced Metallurgical | Electronic Arts vs. Hilton Food Group | Electronic Arts vs. Wheaton Precious Metals | Electronic Arts vs. Panther Metals PLC |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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