Correlation Between Electronic Arts and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and BP Prudhoe 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 BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and BP Prudhoe Bay, you can compare the effects of market volatilities on Electronic Arts and BP Prudhoe 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 BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and BP Prudhoe.
Diversification Opportunities for Electronic Arts and BP Prudhoe
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Electronic and BMI is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay 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 BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Electronic Arts i.e., Electronic Arts and BP Prudhoe go up and down completely randomly.
Pair Corralation between Electronic Arts and BP Prudhoe
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.19 times more return on investment than BP Prudhoe. However, Electronic Arts is 5.23 times less risky than BP Prudhoe. It trades about 0.51 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about 0.05 per unit of risk. If you would invest 13,925 in Electronic Arts on September 5, 2024 and sell it today you would earn a total of 1,969 from holding Electronic Arts or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Electronic Arts vs. BP Prudhoe Bay
Performance |
| Timeline |
| Electronic Arts |
| BP Prudhoe Bay |
Electronic Arts and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and BP Prudhoe
The main advantage of trading using opposite Electronic Arts and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, BP Prudhoe 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 BP Prudhoe will offset losses from the drop in BP Prudhoe's long position.| Electronic Arts vs. NTG Nordic Transport | Electronic Arts vs. PARKEN Sport Entertainment | Electronic Arts vs. LION ONE METALS | Electronic Arts vs. Evolution Mining Limited |
| BP Prudhoe vs. PennyMac Mortgage Investment | BP Prudhoe vs. HK Electric Investments | BP Prudhoe vs. Electronic Arts | BP Prudhoe vs. Arrow 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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