Correlation Between Electronic Arts and Lennar
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Lennar 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 Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Lennar, you can compare the effects of market volatilities on Electronic Arts and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Lennar.
Diversification Opportunities for Electronic Arts and Lennar
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Electronic and Lennar is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Electronic Arts i.e., Electronic Arts and Lennar go up and down completely randomly.
Pair Corralation between Electronic Arts and Lennar
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.52 times more return on investment than Lennar. However, Electronic Arts is 1.91 times less risky than Lennar. It trades about 0.76 of its potential returns per unit of risk. Lennar is currently generating about -0.02 per unit of risk. If you would invest 41,394 in Electronic Arts on August 26, 2024 and sell it today you would earn a total of 7,150 from holding Electronic Arts or generate 17.27% 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. Lennar
Performance |
| Timeline |
| Electronic Arts |
| Lennar |
Electronic Arts and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Lennar
The main advantage of trading using opposite Electronic Arts and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| Electronic Arts vs. Take Two Interactive Software | Electronic Arts vs. Fras le SA | Electronic Arts vs. Clave Indices De | Electronic Arts vs. BTG Pactual Logstica |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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