Correlation Between International Biotechnology and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both International Biotechnology 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 International Biotechnology and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Biotechnology Trust and Electronic Arts, you can compare the effects of market volatilities on International Biotechnology 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 International Biotechnology with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Biotechnology and Electronic Arts.
Diversification Opportunities for International Biotechnology and Electronic Arts
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between International and Electronic is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding International Biotechnology Tr and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and International Biotechnology 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 International Biotechnology Trust 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 International Biotechnology i.e., International Biotechnology and Electronic Arts go up and down completely randomly.
Pair Corralation between International Biotechnology and Electronic Arts
Assuming the 90 days trading horizon International Biotechnology Trust is expected to generate 0.37 times more return on investment than Electronic Arts. However, International Biotechnology Trust is 2.67 times less risky than Electronic Arts. It trades about 0.11 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.27 per unit of risk. If you would invest 67,875 in International Biotechnology Trust on October 26, 2024 and sell it today you would earn a total of 3,125 from holding International Biotechnology Trust or generate 4.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Biotechnology Tr vs. Electronic Arts
Performance |
| Timeline |
| International Biotechnology |
| Electronic Arts |
International Biotechnology and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Biotechnology and Electronic Arts
The main advantage of trading using opposite International Biotechnology and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Biotechnology 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.The idea behind International Biotechnology Trust and Electronic Arts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Electronic Arts vs. International Biotechnology Trust | Electronic Arts vs. Oxford Technology 2 | Electronic Arts vs. Allianz Technology Trust | Electronic Arts vs. Xeros Technology Group |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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