Correlation Between ELECTRONIC ARTS and Magna International
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and Magna International, you can compare the effects of market volatilities on ELECTRONIC ARTS and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and Magna International.
Diversification Opportunities for ELECTRONIC ARTS and Magna International
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ELECTRONIC and Magna is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Magna International go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and Magna International
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to under-perform the Magna International. But the stock apears to be less risky and, when comparing its historical volatility, ELECTRONIC ARTS is 1.22 times less risky than Magna International. The stock trades about -0.59 of its potential returns per unit of risk. The Magna International is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest 4,338 in Magna International on October 9, 2024 and sell it today you would lose (265.00) from holding Magna International or give up 6.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELECTRONIC ARTS vs. Magna International
Performance |
| Timeline |
| ELECTRONIC ARTS |
| Magna International |
ELECTRONIC ARTS and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and Magna International
The main advantage of trading using opposite ELECTRONIC ARTS and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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