Correlation Between General Dynamics and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both General Dynamics and Electronic Arts 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 General Dynamics and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics and Electronic Arts, you can compare the effects of market volatilities on General Dynamics and Electronic Arts 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 General Dynamics with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and Electronic Arts.
Diversification Opportunities for General Dynamics and Electronic Arts
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between General and Electronic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and General Dynamics 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 General Dynamics are associated (or correlated) with Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of General Dynamics i.e., General Dynamics and Electronic Arts go up and down completely randomly.
Pair Corralation between General Dynamics and Electronic Arts
Assuming the 90 days trading horizon General Dynamics is expected to under-perform the Electronic Arts. In addition to that, General Dynamics is 2.35 times more volatile than Electronic Arts. It trades about -0.01 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.63 per unit of volatility. If you would invest 44,143 in Electronic Arts on September 4, 2024 and sell it today you would earn a total of 4,809 from holding Electronic Arts or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.0% |
| Values | Daily Returns |
General Dynamics vs. Electronic Arts
Performance |
| Timeline |
| General Dynamics |
| Electronic Arts |
General Dynamics and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Dynamics and Electronic Arts
The main advantage of trading using opposite General Dynamics and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, Electronic Arts 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 Electronic Arts will offset losses from the drop in Electronic Arts' long position.| General Dynamics vs. Electronic Arts | General Dynamics vs. British American Tobacco | General Dynamics vs. Cognizant Technology Solutions | General Dynamics vs. Take Two Interactive Software |
| Electronic Arts vs. Bilibili | Electronic Arts vs. Fundo Investimento Imobiliario | Electronic Arts vs. Fras le SA | Electronic Arts vs. Western Digital |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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