Correlation Between Electronic Arts and Eastman Chemical
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Eastman Chemical 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 Electronic Arts and Eastman Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Eastman Chemical, you can compare the effects of market volatilities on Electronic Arts and Eastman Chemical 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 Electronic Arts with a short position of Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Eastman Chemical.
Diversification Opportunities for Electronic Arts and Eastman Chemical
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Electronic and Eastman is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical and Electronic Arts 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 Electronic Arts are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Electronic Arts i.e., Electronic Arts and Eastman Chemical go up and down completely randomly.
Pair Corralation between Electronic Arts and Eastman Chemical
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.77 times more return on investment than Eastman Chemical. However, Electronic Arts is 1.3 times less risky than Eastman Chemical. It trades about 0.06 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.04 per unit of risk. If you would invest 12,277 in Electronic Arts on August 31, 2024 and sell it today you would earn a total of 4,090 from holding Electronic Arts or generate 33.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Eastman Chemical
Performance |
| Timeline |
| Electronic Arts |
| Eastman Chemical |
Electronic Arts and Eastman Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Eastman Chemical
The main advantage of trading using opposite Electronic Arts and Eastman Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Eastman Chemical 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 Eastman Chemical will offset losses from the drop in Eastman Chemical's long position.| Electronic Arts vs. Nintendo Co ADR | Electronic Arts vs. Roblox Corp | Electronic Arts vs. NetEase | Electronic Arts vs. Take Two Interactive Software |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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