Correlation Between Inchcape PLC and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Inchcape PLC 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 Inchcape PLC and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inchcape PLC and Electronic Arts, you can compare the effects of market volatilities on Inchcape PLC 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 Inchcape PLC with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inchcape PLC and Electronic Arts.
Diversification Opportunities for Inchcape PLC and Electronic Arts
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Inchcape and Electronic is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Inchcape PLC and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Inchcape PLC 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 Inchcape PLC 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 Inchcape PLC i.e., Inchcape PLC and Electronic Arts go up and down completely randomly.
Pair Corralation between Inchcape PLC and Electronic Arts
Assuming the 90 days trading horizon Inchcape PLC is expected to generate 1.38 times more return on investment than Electronic Arts. However, Inchcape PLC is 1.38 times more volatile than Electronic Arts. It trades about 0.19 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.18 per unit of risk. If you would invest 74,650 in Inchcape PLC on September 12, 2024 and sell it today you would earn a total of 3,800 from holding Inchcape PLC or generate 5.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Inchcape PLC vs. Electronic Arts
Performance |
| Timeline |
| Inchcape PLC |
| Electronic Arts |
Inchcape PLC and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inchcape PLC and Electronic Arts
The main advantage of trading using opposite Inchcape PLC and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inchcape PLC 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.| Inchcape PLC vs. JB Hunt Transport | Inchcape PLC vs. CAP LEASE AVIATION | Inchcape PLC vs. Roadside Real Estate | Inchcape PLC vs. International Biotechnology Trust |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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