Correlation Between ELECTRONIC ARTS and ADT
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and ADT 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 ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and ADT Inc, you can compare the effects of market volatilities on ELECTRONIC ARTS and ADT 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 ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and ADT.
Diversification Opportunities for ELECTRONIC ARTS and ADT
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ELECTRONIC and ADT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc 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 ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and ADT go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and ADT
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.54 times more return on investment than ADT. However, ELECTRONIC ARTS is 1.85 times less risky than ADT. It trades about 0.03 of its potential returns per unit of risk. ADT Inc is currently generating about 0.01 per unit of risk. If you would invest 11,430 in ELECTRONIC ARTS on October 16, 2024 and sell it today you would earn a total of 2,268 from holding ELECTRONIC ARTS or generate 19.84% 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. ADT Inc
Performance |
| Timeline |
| ELECTRONIC ARTS |
| ADT Inc |
ELECTRONIC ARTS and ADT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and ADT
The main advantage of trading using opposite ELECTRONIC ARTS and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.| ELECTRONIC ARTS vs. The Hanover Insurance | ELECTRONIC ARTS vs. MCEWEN MINING INC | ELECTRONIC ARTS vs. SERI INDUSTRIAL EO | ELECTRONIC ARTS vs. CDN IMPERIAL BANK |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |