Correlation Between Iridium Communications and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Iridium Communications 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 Iridium Communications and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iridium Communications and Electronic Arts, you can compare the effects of market volatilities on Iridium Communications 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 Iridium Communications with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iridium Communications and Electronic Arts.
Diversification Opportunities for Iridium Communications and Electronic Arts
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Iridium and Electronic is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Iridium Communications and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Iridium Communications 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 Iridium Communications 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 Iridium Communications i.e., Iridium Communications and Electronic Arts go up and down completely randomly.
Pair Corralation between Iridium Communications and Electronic Arts
Assuming the 90 days horizon Iridium Communications is expected to under-perform the Electronic Arts. In addition to that, Iridium Communications is 1.8 times more volatile than Electronic Arts. It trades about -0.03 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.05 per unit of volatility. If you would invest 11,828 in Electronic Arts on September 3, 2024 and sell it today you would earn a total of 3,686 from holding Electronic Arts or generate 31.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.69% |
| Values | Daily Returns |
Iridium Communications vs. Electronic Arts
Performance |
| Timeline |
| Iridium Communications |
| Electronic Arts |
Iridium Communications and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iridium Communications and Electronic Arts
The main advantage of trading using opposite Iridium Communications and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iridium Communications 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.| Iridium Communications vs. Cardinal Health | Iridium Communications vs. EPSILON HEALTHCARE LTD | Iridium Communications vs. Computer And Technologies | Iridium Communications vs. Spirent Communications plc |
| Electronic Arts vs. TOTAL GABON | Electronic Arts vs. Walgreens Boots Alliance | Electronic Arts vs. Peak Resources Limited |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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