Correlation Between Charter Communications and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Charter 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 Charter 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 Charter Communications and Electronic Arts, you can compare the effects of market volatilities on Charter 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 Charter Communications with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and Electronic Arts.
Diversification Opportunities for Charter Communications and Electronic Arts
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Charter and Electronic is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Charter 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 Charter 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 Charter Communications i.e., Charter Communications and Electronic Arts go up and down completely randomly.
Pair Corralation between Charter Communications and Electronic Arts
Assuming the 90 days trading horizon Charter Communications is expected to generate 3.43 times more return on investment than Electronic Arts. However, Charter Communications is 3.43 times more volatile than Electronic Arts. It trades about 0.29 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.57 per unit of risk. If you would invest 3,141 in Charter Communications on August 30, 2024 and sell it today you would earn a total of 734.00 from holding Charter Communications or generate 23.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications vs. Electronic Arts
Performance |
| Timeline |
| Charter Communications |
| Electronic Arts |
Charter Communications and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and Electronic Arts
The main advantage of trading using opposite Charter Communications and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter 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.The idea behind Charter Communications and Electronic Arts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Electronic Arts vs. Bemobi Mobile Tech | Electronic Arts vs. Waste Management | Electronic Arts vs. Take Two Interactive Software | Electronic Arts vs. Bank of America |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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