Correlation Between Electronic Arts and Illumina
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Illumina 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 Illumina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Illumina, you can compare the effects of market volatilities on Electronic Arts and Illumina 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 Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Illumina.
Diversification Opportunities for Electronic Arts and Illumina
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Electronic and Illumina is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina 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 Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Electronic Arts i.e., Electronic Arts and Illumina go up and down completely randomly.
Pair Corralation between Electronic Arts and Illumina
Assuming the 90 days trading horizon Electronic Arts is expected to generate 1.11 times less return on investment than Illumina. But when comparing it to its historical volatility, Electronic Arts is 2.96 times less risky than Illumina. It trades about 0.09 of its potential returns per unit of risk. Illumina is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 13,806 in Illumina on September 14, 2024 and sell it today you would earn a total of 182.00 from holding Illumina or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Illumina
Performance |
| Timeline |
| Electronic Arts |
| Illumina |
Electronic Arts and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Illumina
The main advantage of trading using opposite Electronic Arts and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.| Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc |
| Illumina vs. Tencent Music Entertainment | Illumina vs. WT OFFSHORE | Illumina vs. BW OFFSHORE LTD | Illumina vs. PROSIEBENSAT1 MEDIADR4 |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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