Correlation Between CAL MAINE and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both CAL MAINE 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 CAL MAINE and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CAL MAINE FOODS and Electronic Arts, you can compare the effects of market volatilities on CAL MAINE 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 CAL MAINE with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAL MAINE and Electronic Arts.
Diversification Opportunities for CAL MAINE and Electronic Arts
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CAL and Electronic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CAL MAINE FOODS and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and CAL MAINE 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 CAL MAINE FOODS 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 CAL MAINE i.e., CAL MAINE and Electronic Arts go up and down completely randomly.
Pair Corralation between CAL MAINE and Electronic Arts
Assuming the 90 days trading horizon CAL MAINE FOODS is expected to generate 1.43 times more return on investment than Electronic Arts. However, CAL MAINE is 1.43 times more volatile than Electronic Arts. It trades about 0.09 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.03 per unit of risk. If you would invest 4,580 in CAL MAINE FOODS on September 25, 2024 and sell it today you would earn a total of 5,244 from holding CAL MAINE FOODS or generate 114.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.69% |
| Values | Daily Returns |
CAL MAINE FOODS vs. Electronic Arts
Performance |
| Timeline |
| CAL MAINE FOODS |
| Electronic Arts |
CAL MAINE and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CAL MAINE and Electronic Arts
The main advantage of trading using opposite CAL MAINE and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAL MAINE 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 CAL MAINE FOODS 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. ANTA SPORTS PRODUCT | Electronic Arts vs. Transportadora de Gas | Electronic Arts vs. COLUMBIA SPORTSWEAR | Electronic Arts vs. Ramsay Health Care |
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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