Correlation Between Cisco Systems and ELECTRONIC ARTS
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and ELECTRONIC ARTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and ELECTRONIC ARTS, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and ELECTRONIC ARTS.
Diversification Opportunities for Cisco Systems and ELECTRONIC ARTS
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and ELECTRONIC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and ELECTRONIC ARTS go up and down completely randomly.
Pair Corralation between Cisco Systems and ELECTRONIC ARTS
Assuming the 90 days horizon Cisco Systems is expected to generate 1.12 times less return on investment than ELECTRONIC ARTS. In addition to that, Cisco Systems is 1.08 times more volatile than ELECTRONIC ARTS. It trades about 0.34 of its total potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.42 per unit of volatility. 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. ELECTRONIC ARTS
Performance |
| Timeline |
| Cisco Systems |
| ELECTRONIC ARTS |
Cisco Systems and ELECTRONIC ARTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and ELECTRONIC ARTS
The main advantage of trading using opposite Cisco Systems and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. Playtech plc | Cisco Systems vs. Electronic Arts | Cisco Systems vs. ANTA SPORTS PRODUCT | Cisco Systems vs. USWE SPORTS AB |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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