Correlation Between Electronic Arts and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and CNH Industrial 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 CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and CNH Industrial NV, you can compare the effects of market volatilities on Electronic Arts and CNH Industrial 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 CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and CNH Industrial.
Diversification Opportunities for Electronic Arts and CNH Industrial
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Electronic and CNH is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of Electronic Arts i.e., Electronic Arts and CNH Industrial go up and down completely randomly.
Pair Corralation between Electronic Arts and CNH Industrial
Assuming the 90 days trading horizon Electronic Arts is expected to under-perform the CNH Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 1.16 times less risky than CNH Industrial. The stock trades about -0.01 of its potential returns per unit of risk. The CNH Industrial NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,088 in CNH Industrial NV on November 4, 2024 and sell it today you would earn a total of 159.00 from holding CNH Industrial NV or generate 14.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.4% |
| Values | Daily Returns |
Electronic Arts vs. CNH Industrial NV
Performance |
| Timeline |
| Electronic Arts |
| CNH Industrial NV |
Electronic Arts and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and CNH Industrial
The main advantage of trading using opposite Electronic Arts and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.| Electronic Arts vs. China National Building | Electronic Arts vs. VULCAN MATERIALS | Electronic Arts vs. GOODYEAR T RUBBER | Electronic Arts vs. Goodyear Tire Rubber |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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