Correlation Between SMA Solar and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both SMA Solar 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 SMA Solar and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and Electronic Arts, you can compare the effects of market volatilities on SMA Solar 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 SMA Solar with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and Electronic Arts.
Diversification Opportunities for SMA Solar and Electronic Arts
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between SMA and Electronic is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and SMA Solar 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 SMA Solar Technology 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 SMA Solar i.e., SMA Solar and Electronic Arts go up and down completely randomly.
Pair Corralation between SMA Solar and Electronic Arts
Assuming the 90 days trading horizon SMA Solar Technology is expected to under-perform the Electronic Arts. In addition to that, SMA Solar is 2.89 times more volatile than Electronic Arts. It trades about -0.07 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.03 per unit of volatility. If you would invest 12,576 in Electronic Arts on October 16, 2024 and sell it today you would earn a total of 1,554 from holding Electronic Arts or generate 12.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
SMA Solar Technology vs. Electronic Arts
Performance |
| Timeline |
| SMA Solar Technology |
| Electronic Arts |
SMA Solar and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and Electronic Arts
The main advantage of trading using opposite SMA Solar and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar 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.| SMA Solar vs. Air Products Chemicals | SMA Solar vs. Creo Medical Group | SMA Solar vs. Extra Space Storage | SMA Solar vs. Wizz Air Holdings |
| Electronic Arts vs. Batm Advanced Communications | Electronic Arts vs. Zoom Video Communications | Electronic Arts vs. SMA Solar Technology | Electronic Arts vs. MTI Wireless Edge |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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