Correlation Between ELECTRONIC ARTS and Toll Brothers
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and Toll Brothers 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 Toll Brothers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and Toll Brothers, you can compare the effects of market volatilities on ELECTRONIC ARTS and Toll Brothers 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 Toll Brothers. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and Toll Brothers.
Diversification Opportunities for ELECTRONIC ARTS and Toll Brothers
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ELECTRONIC and Toll is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Toll Brothers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toll Brothers 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 Toll Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toll Brothers has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Toll Brothers go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and Toll Brothers
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 1.36 times less return on investment than Toll Brothers. But when comparing it to its historical volatility, ELECTRONIC ARTS is 2.01 times less risky than Toll Brothers. It trades about 0.42 of its potential returns per unit of risk. Toll Brothers is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 13,540 in Toll Brothers on September 1, 2024 and sell it today you would earn a total of 2,535 from holding Toll Brothers or generate 18.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
ELECTRONIC ARTS vs. Toll Brothers
Performance |
| Timeline |
| ELECTRONIC ARTS |
| Toll Brothers |
ELECTRONIC ARTS and Toll Brothers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ELECTRONIC ARTS and Toll Brothers
The main advantage of trading using opposite ELECTRONIC ARTS and Toll Brothers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, Toll Brothers 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 Toll Brothers will offset losses from the drop in Toll Brothers' long position.| ELECTRONIC ARTS vs. SIVERS SEMICONDUCTORS AB | ELECTRONIC ARTS vs. Darden Restaurants | ELECTRONIC ARTS vs. Reliance Steel Aluminum | ELECTRONIC ARTS vs. Q2M Managementberatung AG |
| Toll Brothers vs. ON SEMICONDUCTOR | Toll Brothers vs. BYD ELECTRONIC | Toll Brothers vs. ELECTRONIC ARTS | Toll Brothers vs. Richardson 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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