Correlation Between Electronic Arts and Telefonica
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Telefonica 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 Telefonica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Telefonica SA ADR, you can compare the effects of market volatilities on Electronic Arts and Telefonica 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 Telefonica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Telefonica.
Diversification Opportunities for Electronic Arts and Telefonica
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Electronic and Telefonica is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR 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 Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of Electronic Arts i.e., Electronic Arts and Telefonica go up and down completely randomly.
Pair Corralation between Electronic Arts and Telefonica
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 1.39 times less return on investment than Telefonica. But when comparing it to its historical volatility, Electronic Arts is 1.08 times less risky than Telefonica. It trades about 0.05 of its potential returns per unit of risk. Telefonica SA ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 304.00 in Telefonica SA ADR on August 30, 2024 and sell it today you would earn a total of 149.00 from holding Telefonica SA ADR or generate 49.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Electronic Arts vs. Telefonica SA ADR
Performance |
| Timeline |
| Electronic Arts |
| Telefonica SA ADR |
Electronic Arts and Telefonica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Telefonica
The main advantage of trading using opposite Electronic Arts and Telefonica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Telefonica 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 Telefonica will offset losses from the drop in Telefonica'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 |
| Telefonica vs. Orange SA ADR | Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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