Correlation Between ELECTRONIC ARTS and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and Summit Hotel 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 Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and Summit Hotel Properties, you can compare the effects of market volatilities on ELECTRONIC ARTS and Summit Hotel 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 Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and Summit Hotel.
Diversification Opportunities for ELECTRONIC ARTS and Summit Hotel
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ELECTRONIC and Summit is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Summit Hotel go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and Summit Hotel
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.71 times more return on investment than Summit Hotel. However, ELECTRONIC ARTS is 1.41 times less risky than Summit Hotel. It trades about 0.13 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.05 per unit of risk. If you would invest 11,960 in ELECTRONIC ARTS on September 3, 2024 and sell it today you would earn a total of 3,460 from holding ELECTRONIC ARTS or generate 28.93% 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. Summit Hotel Properties
Performance |
| Timeline |
| ELECTRONIC ARTS |
| Summit Hotel Properties |
ELECTRONIC ARTS and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and Summit Hotel
The main advantage of trading using opposite ELECTRONIC ARTS and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, Summit Hotel 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 Summit Hotel will offset losses from the drop in Summit Hotel's long position.| ELECTRONIC ARTS vs. FEMALE HEALTH | ELECTRONIC ARTS vs. DiamondRock Hospitality | ELECTRONIC ARTS vs. SHIP HEALTHCARE HLDGINC | ELECTRONIC ARTS vs. YOOMA WELLNESS INC |
| Summit Hotel vs. PSI Software AG | Summit Hotel vs. Cogent Communications Holdings | Summit Hotel vs. CyberArk Software | Summit Hotel vs. INTERSHOP Communications Aktiengesellschaft |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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