Correlation Between New Residential and ELECTRONIC ARTS
Can any of the company-specific risk be diversified away by investing in both New Residential 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 New Residential and ELECTRONIC ARTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and ELECTRONIC ARTS, you can compare the effects of market volatilities on New Residential 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 New Residential with a short position of ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and ELECTRONIC ARTS.
Diversification Opportunities for New Residential and ELECTRONIC ARTS
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and ELECTRONIC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and New Residential 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 New Residential Investment 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 New Residential i.e., New Residential and ELECTRONIC ARTS go up and down completely randomly.
Pair Corralation between New Residential and ELECTRONIC ARTS
Assuming the 90 days trading horizon New Residential is expected to generate 1.49 times less return on investment than ELECTRONIC ARTS. But when comparing it to its historical volatility, New Residential Investment is 1.3 times less risky than ELECTRONIC ARTS. It trades about 0.36 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 13,611 in ELECTRONIC ARTS on September 1, 2024 and sell it today you would earn a total of 1,809 from holding ELECTRONIC ARTS or generate 13.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. ELECTRONIC ARTS
Performance |
| Timeline |
| New Residential Inve |
| ELECTRONIC ARTS |
New Residential and ELECTRONIC ARTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and ELECTRONIC ARTS
The main advantage of trading using opposite New Residential and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential 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's long position.| New Residential vs. TRAINLINE PLC LS | New Residential vs. Soken Chemical Engineering | New Residential vs. Siamgas And Petrochemicals | New Residential vs. SEKISUI CHEMICAL |
| ELECTRONIC ARTS vs. SIVERS SEMICONDUCTORS AB | ELECTRONIC ARTS vs. Darden Restaurants | ELECTRONIC ARTS vs. Reliance Steel Aluminum | ELECTRONIC ARTS vs. Q2M Managementberatung AG |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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