Correlation Between Energisa and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Energisa and Electronic Arts 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 Energisa and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Electronic Arts, you can compare the effects of market volatilities on Energisa and Electronic Arts 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 Energisa with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Electronic Arts.
Diversification Opportunities for Energisa and Electronic Arts
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energisa and Electronic is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Energisa 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 Energisa SA are associated (or correlated) with Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Energisa i.e., Energisa and Electronic Arts go up and down completely randomly.
Pair Corralation between Energisa and Electronic Arts
Assuming the 90 days trading horizon Energisa is expected to generate 7.48 times less return on investment than Electronic Arts. But when comparing it to its historical volatility, Energisa SA is 1.01 times less risky than Electronic Arts. It trades about 0.01 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 32,853 in Electronic Arts on September 3, 2024 and sell it today you would earn a total of 16,099 from holding Electronic Arts or generate 49.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Energisa SA vs. Electronic Arts
Performance |
| Timeline |
| Energisa SA |
| Electronic Arts |
Energisa and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and Electronic Arts
The main advantage of trading using opposite Energisa and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| Electronic Arts vs. Take Two Interactive Software | Electronic Arts vs. Bilibili | Electronic Arts vs. Fundo Investimento Imobiliario | Electronic Arts vs. Fras le SA |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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