Correlation Between Electronic Arts and Stepan
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Stepan 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 Stepan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Stepan Company, you can compare the effects of market volatilities on Electronic Arts and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Stepan.
Diversification Opportunities for Electronic Arts and Stepan
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Electronic and Stepan is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Electronic Arts i.e., Electronic Arts and Stepan go up and down completely randomly.
Pair Corralation between Electronic Arts and Stepan
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.67 times more return on investment than Stepan. However, Electronic Arts is 1.49 times less risky than Stepan. It trades about 0.05 of its potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of risk. If you would invest 12,611 in Electronic Arts on August 27, 2024 and sell it today you would earn a total of 4,056 from holding Electronic Arts or generate 32.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Stepan Company
Performance |
| Timeline |
| Electronic Arts |
| Stepan Company |
Electronic Arts and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Stepan
The main advantage of trading using opposite Electronic Arts and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.| Electronic Arts vs. Playstudios | Electronic Arts vs. Talkspace | Electronic Arts vs. Katapult Holdings Equity | Electronic Arts vs. Aquagold International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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