Correlation Between ELECTRONIC ARTS and ArcelorMittal
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and ArcelorMittal 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 ArcelorMittal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and ArcelorMittal, you can compare the effects of market volatilities on ELECTRONIC ARTS and ArcelorMittal 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 ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and ArcelorMittal.
Diversification Opportunities for ELECTRONIC ARTS and ArcelorMittal
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ELECTRONIC and ArcelorMittal is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and ArcelorMittal go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and ArcelorMittal
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.73 times more return on investment than ArcelorMittal. However, ELECTRONIC ARTS is 1.37 times less risky than ArcelorMittal. It trades about 0.05 of its potential returns per unit of risk. ArcelorMittal is currently generating about 0.01 per unit of risk. If you would invest 12,304 in ELECTRONIC ARTS on August 24, 2024 and sell it today you would earn a total of 3,704 from holding ELECTRONIC ARTS or generate 30.1% 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. ArcelorMittal
Performance |
| Timeline |
| ELECTRONIC ARTS |
| ArcelorMittal |
ELECTRONIC ARTS and ArcelorMittal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and ArcelorMittal
The main advantage of trading using opposite ELECTRONIC ARTS and ArcelorMittal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, ArcelorMittal 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 ArcelorMittal will offset losses from the drop in ArcelorMittal's long position.| ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc |
| ArcelorMittal vs. ELECTRONIC ARTS | ArcelorMittal vs. AOI Electronics Co | ArcelorMittal vs. PKSHA TECHNOLOGY INC | ArcelorMittal vs. Methode Electronics |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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