Correlation Between ELECTRONIC ARTS and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and STMicroelectronics NV, you can compare the effects of market volatilities on ELECTRONIC ARTS and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and STMicroelectronics.
Diversification Opportunities for ELECTRONIC ARTS and STMicroelectronics
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ELECTRONIC and STMicroelectronics is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and STMicroelectronics go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and STMicroelectronics
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.59 times more return on investment than STMicroelectronics. However, ELECTRONIC ARTS is 1.71 times less risky than STMicroelectronics. It trades about 0.55 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.18 per unit of risk. If you would invest 13,280 in ELECTRONIC ARTS on August 30, 2024 and sell it today you would earn a total of 2,400 from holding ELECTRONIC ARTS or generate 18.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ELECTRONIC ARTS vs. STMicroelectronics NV
Performance |
| Timeline |
| ELECTRONIC ARTS |
| STMicroelectronics |
ELECTRONIC ARTS and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and STMicroelectronics
The main advantage of trading using opposite ELECTRONIC ARTS and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Superior Plus Corp | ELECTRONIC ARTS vs. SIVERS SEMICONDUCTORS AB |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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