Correlation Between Electronic Arts and Liberty Media
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Liberty Media 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 Liberty Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Liberty Media, you can compare the effects of market volatilities on Electronic Arts and Liberty Media 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 Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Liberty Media.
Diversification Opportunities for Electronic Arts and Liberty Media
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Electronic and Liberty is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Liberty Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media has no effect on the direction of Electronic Arts i.e., Electronic Arts and Liberty Media go up and down completely randomly.
Pair Corralation between Electronic Arts and Liberty Media
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.56 times more return on investment than Liberty Media. However, Electronic Arts is 1.79 times less risky than Liberty Media. It trades about 0.43 of its potential returns per unit of risk. Liberty Media is currently generating about 0.17 per unit of risk. If you would invest 14,545 in Electronic Arts on August 30, 2024 and sell it today you would earn a total of 1,765 from holding Electronic Arts or generate 12.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Liberty Media
Performance |
| Timeline |
| Electronic Arts |
| Liberty Media |
Electronic Arts and Liberty Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Liberty Media
The main advantage of trading using opposite Electronic Arts and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Liberty Media 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 Liberty Media will offset losses from the drop in Liberty Media'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 |
| Liberty Media vs. Liberty Media | Liberty Media vs. Atlanta Braves Holdings, | Liberty Media vs. News Corp B | Liberty Media vs. News Corp A |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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