Correlation Between Dow Jones and ELECTRONIC ARTS
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and ELECTRONIC ARTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and ELECTRONIC ARTS, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ELECTRONIC ARTS.
Diversification Opportunities for Dow Jones and ELECTRONIC ARTS
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and ELECTRONIC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and ELECTRONIC ARTS go up and down completely randomly.
Pair Corralation between Dow Jones and ELECTRONIC ARTS
Assuming the 90 days trading horizon Dow Jones is expected to generate 2.05 times less return on investment than ELECTRONIC ARTS. But when comparing it to its historical volatility, Dow Jones Industrial is 1.44 times less risky than ELECTRONIC ARTS. It trades about 0.29 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 13,673 in ELECTRONIC ARTS on August 31, 2024 and sell it today you would earn a total of 1,773 from holding ELECTRONIC ARTS or generate 12.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. ELECTRONIC ARTS
Performance |
| Timeline |
Dow Jones and ELECTRONIC ARTS Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ELECTRONIC ARTS
Pair trading matchups for ELECTRONIC ARTS
Pair Trading with Dow Jones and ELECTRONIC ARTS
The main advantage of trading using opposite Dow Jones and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |