Correlation Between Electronic Arts and UnitedHealth Group
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and UnitedHealth Group 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 UnitedHealth Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and UnitedHealth Group Incorporated, you can compare the effects of market volatilities on Electronic Arts and UnitedHealth Group 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 UnitedHealth Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and UnitedHealth Group.
Diversification Opportunities for Electronic Arts and UnitedHealth Group
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Electronic and UnitedHealth is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and UnitedHealth Group Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UnitedHealth Group 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 UnitedHealth Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UnitedHealth Group has no effect on the direction of Electronic Arts i.e., Electronic Arts and UnitedHealth Group go up and down completely randomly.
Pair Corralation between Electronic Arts and UnitedHealth Group
Assuming the 90 days trading horizon Electronic Arts is expected to generate 1.24 times more return on investment than UnitedHealth Group. However, Electronic Arts is 1.24 times more volatile than UnitedHealth Group Incorporated. It trades about 0.29 of its potential returns per unit of risk. UnitedHealth Group Incorporated is currently generating about -0.37 per unit of risk. If you would invest 34,714 in Electronic Arts on November 28, 2024 and sell it today you would earn a total of 5,495 from holding Electronic Arts or generate 15.83% 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. UnitedHealth Group Incorporate
Performance |
| Timeline |
| Electronic Arts |
| UnitedHealth Group |
Electronic Arts and UnitedHealth Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and UnitedHealth Group
The main advantage of trading using opposite Electronic Arts and UnitedHealth Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, UnitedHealth Group 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 UnitedHealth Group will offset losses from the drop in UnitedHealth Group's long position.| Electronic Arts vs. Autohome | Electronic Arts vs. Align Technology | Electronic Arts vs. Brpr Corporate Offices | Electronic Arts vs. UnitedHealth Group Incorporated |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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