Correlation Between Electronic Arts and Nintendo
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Nintendo 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 Nintendo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Nintendo Co, you can compare the effects of market volatilities on Electronic Arts and Nintendo 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 Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Nintendo.
Diversification Opportunities for Electronic Arts and Nintendo
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Electronic and Nintendo is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo 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 Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo has no effect on the direction of Electronic Arts i.e., Electronic Arts and Nintendo go up and down completely randomly.
Pair Corralation between Electronic Arts and Nintendo
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.39 times more return on investment than Nintendo. However, Electronic Arts is 2.57 times less risky than Nintendo. It trades about 0.15 of its potential returns per unit of risk. Nintendo Co is currently generating about 0.01 per unit of risk. If you would invest 13,267 in Electronic Arts on August 30, 2024 and sell it today you would earn a total of 3,043 from holding Electronic Arts or generate 22.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Nintendo Co
Performance |
| Timeline |
| Electronic Arts |
| Nintendo |
Electronic Arts and Nintendo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Nintendo
The main advantage of trading using opposite Electronic Arts and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Nintendo 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 Nintendo will offset losses from the drop in Nintendo'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 |
| Nintendo vs. Playstudios | Nintendo vs. Doubledown Interactive Co | Nintendo vs. Bragg Gaming Group | Nintendo vs. Golden Matrix Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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