Correlation Between Electronic Arts and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Smithson Investment 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 Electronic Arts and Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Smithson Investment Trust, you can compare the effects of market volatilities on Electronic Arts and Smithson Investment 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 Electronic Arts with a short position of Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Smithson Investment.
Diversification Opportunities for Electronic Arts and Smithson Investment
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Electronic and Smithson is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust and Electronic Arts 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 Electronic Arts are associated (or correlated) with Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Electronic Arts i.e., Electronic Arts and Smithson Investment go up and down completely randomly.
Pair Corralation between Electronic Arts and Smithson Investment
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.9 times more return on investment than Smithson Investment. However, Electronic Arts is 1.11 times less risky than Smithson Investment. It trades about 0.73 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.14 per unit of risk. If you would invest 14,492 in Electronic Arts on August 24, 2024 and sell it today you would earn a total of 2,241 from holding Electronic Arts or generate 15.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Smithson Investment Trust
Performance |
| Timeline |
| Electronic Arts |
| Smithson Investment Trust |
Electronic Arts and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Smithson Investment
The main advantage of trading using opposite Electronic Arts and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Electronic Arts vs. Quadrise Plc | Electronic Arts vs. Intuitive Investments Group | Electronic Arts vs. European Metals Holdings | Electronic Arts vs. Athelney Trust plc |
| Smithson Investment vs. Sabre Insurance Group | Smithson Investment vs. Take Two Interactive Software | Smithson Investment vs. Zurich Insurance Group | Smithson Investment vs. Wheaton Precious Metals |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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