Correlation Between ELECTRONIC ARTS and M/I Homes
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and M/I Homes 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 M/I Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and MI Homes, you can compare the effects of market volatilities on ELECTRONIC ARTS and M/I Homes 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 M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and M/I Homes.
Diversification Opportunities for ELECTRONIC ARTS and M/I Homes
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between ELECTRONIC and M/I is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes 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 M/I Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M/I Homes has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and M/I Homes go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and M/I Homes
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 4.05 times less return on investment than M/I Homes. But when comparing it to its historical volatility, ELECTRONIC ARTS is 1.67 times less risky than M/I Homes. It trades about 0.05 of its potential returns per unit of risk. MI Homes is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,380 in MI Homes on September 18, 2024 and sell it today you would earn a total of 10,535 from holding MI Homes or generate 240.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELECTRONIC ARTS vs. MI Homes
Performance |
| Timeline |
| ELECTRONIC ARTS |
| M/I Homes |
ELECTRONIC ARTS and M/I Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and M/I Homes
The main advantage of trading using opposite ELECTRONIC ARTS and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, M/I Homes 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 M/I Homes will offset losses from the drop in M/I Homes' long position.| ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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