Correlation Between Electronic Arts and National Beverage
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and National Beverage 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 National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and National Beverage Corp, you can compare the effects of market volatilities on Electronic Arts and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and National Beverage.
Diversification Opportunities for Electronic Arts and National Beverage
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Electronic and National is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Electronic Arts i.e., Electronic Arts and National Beverage go up and down completely randomly.
Pair Corralation between Electronic Arts and National Beverage
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.7 times more return on investment than National Beverage. However, Electronic Arts is 1.43 times less risky than National Beverage. It trades about 0.42 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.19 per unit of risk. If you would invest 12,870 in Electronic Arts on September 3, 2024 and sell it today you would earn a total of 2,644 from holding Electronic Arts or generate 20.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. National Beverage Corp
Performance |
| Timeline |
| Electronic Arts |
| National Beverage Corp |
Electronic Arts and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and National Beverage
The main advantage of trading using opposite Electronic Arts and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Electronic Arts vs. TOTAL GABON | Electronic Arts vs. Walgreens Boots Alliance | Electronic Arts vs. Peak Resources Limited |
| National Beverage vs. HK Electric Investments | National Beverage vs. United Utilities Group | National Beverage vs. United Internet AG | National Beverage vs. WisdomTree Investments |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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