Correlation Between ELECTRONIC ARTS and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and Renesas Electronics 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 Renesas Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and Renesas Electronics, you can compare the effects of market volatilities on ELECTRONIC ARTS and Renesas Electronics 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 Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and Renesas Electronics.
Diversification Opportunities for ELECTRONIC ARTS and Renesas Electronics
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ELECTRONIC and Renesas is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Renesas Electronics go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and Renesas Electronics
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.42 times more return on investment than Renesas Electronics. However, ELECTRONIC ARTS is 2.38 times less risky than Renesas Electronics. It trades about 0.53 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.03 per unit of risk. If you would invest 13,440 in ELECTRONIC ARTS on August 24, 2024 and sell it today you would earn a total of 2,324 from holding ELECTRONIC ARTS or generate 17.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELECTRONIC ARTS vs. Renesas Electronics
Performance |
| Timeline |
| ELECTRONIC ARTS |
| Renesas Electronics |
ELECTRONIC ARTS and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and Renesas Electronics
The main advantage of trading using opposite ELECTRONIC ARTS and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, Renesas Electronics 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 Renesas Electronics will offset losses from the drop in Renesas Electronics' long position.| ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc |
| Renesas Electronics vs. Constellation Software | Renesas Electronics vs. AXWAY SOFTWARE EO | Renesas Electronics vs. SLR Investment Corp | Renesas Electronics vs. MAGIC SOFTWARE ENTR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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