Correlation Between Electronic Arts and RETAIL FOOD
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and RETAIL FOOD 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 RETAIL FOOD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and RETAIL FOOD GROUP, you can compare the effects of market volatilities on Electronic Arts and RETAIL FOOD 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 RETAIL FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and RETAIL FOOD.
Diversification Opportunities for Electronic Arts and RETAIL FOOD
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Electronic and RETAIL is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of Electronic Arts i.e., Electronic Arts and RETAIL FOOD go up and down completely randomly.
Pair Corralation between Electronic Arts and RETAIL FOOD
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.07 times more return on investment than RETAIL FOOD. However, Electronic Arts is 14.14 times less risky than RETAIL FOOD. It trades about 0.4 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about -0.14 per unit of risk. If you would invest 13,146 in Electronic Arts on September 13, 2024 and sell it today you would earn a total of 2,568 from holding Electronic Arts or generate 19.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. RETAIL FOOD GROUP
Performance |
| Timeline |
| Electronic Arts |
| RETAIL FOOD GROUP |
Electronic Arts and RETAIL FOOD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and RETAIL FOOD
The main advantage of trading using opposite Electronic Arts and RETAIL FOOD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, RETAIL FOOD 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 RETAIL FOOD will offset losses from the drop in RETAIL FOOD's long position.| Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc | Electronic Arts vs. Apple Inc |
| RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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