Correlation Between Grand Canyon and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Grand Canyon 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 Grand Canyon and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand Canyon Education and Electronic Arts, you can compare the effects of market volatilities on Grand Canyon 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 Grand Canyon with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Canyon and Electronic Arts.
Diversification Opportunities for Grand Canyon and Electronic Arts
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Grand and Electronic is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and Electronic Arts go up and down completely randomly.
Pair Corralation between Grand Canyon and Electronic Arts
Assuming the 90 days trading horizon Grand Canyon Education is expected to generate 2.2 times more return on investment than Electronic Arts. However, Grand Canyon is 2.2 times more volatile than Electronic Arts. It trades about 0.13 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.18 per unit of risk. If you would invest 12,900 in Grand Canyon Education on August 31, 2024 and sell it today you would earn a total of 2,600 from holding Grand Canyon Education or generate 20.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grand Canyon Education vs. Electronic Arts
Performance |
| Timeline |
| Grand Canyon Education |
| Electronic Arts |
Grand Canyon and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grand Canyon and Electronic Arts
The main advantage of trading using opposite Grand Canyon and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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.| Grand Canyon vs. Aedas Homes SA | Grand Canyon vs. MTI WIRELESS EDGE | Grand Canyon vs. Haier Smart Home | Grand Canyon vs. CENTURIA OFFICE REIT |
| Electronic Arts vs. URBAN OUTFITTERS | Electronic Arts vs. Astral Foods Limited | Electronic Arts vs. JJ SNACK FOODS | Electronic Arts vs. CarsalesCom |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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