Correlation Between NETGEAR and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both NETGEAR 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 NETGEAR and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NETGEAR and Electronic Arts, you can compare the effects of market volatilities on NETGEAR 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 NETGEAR with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of NETGEAR and Electronic Arts.
Diversification Opportunities for NETGEAR and Electronic Arts
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NETGEAR and Electronic is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Electronic Arts go up and down completely randomly.
Pair Corralation between NETGEAR and Electronic Arts
Given the investment horizon of 90 days NETGEAR is expected to generate 1.77 times more return on investment than Electronic Arts. However, NETGEAR is 1.77 times more volatile than Electronic Arts. It trades about 0.42 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.58 per unit of risk. If you would invest 2,033 in NETGEAR on August 24, 2024 and sell it today you would earn a total of 397.00 from holding NETGEAR or generate 19.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NETGEAR vs. Electronic Arts
Performance |
| Timeline |
| NETGEAR |
| Electronic Arts |
NETGEAR and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NETGEAR and Electronic Arts
The main advantage of trading using opposite NETGEAR and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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.| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG ADR |
| Electronic Arts vs. Nintendo Co ADR | Electronic Arts vs. Roblox Corp | Electronic Arts vs. NetEase | Electronic Arts vs. Take Two Interactive Software |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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