Correlation Between TOTAL GABON and ELECTRONIC ARTS
Can any of the company-specific risk be diversified away by investing in both TOTAL GABON 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 TOTAL GABON and ELECTRONIC ARTS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOTAL GABON and ELECTRONIC ARTS, you can compare the effects of market volatilities on TOTAL GABON 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 TOTAL GABON with a short position of ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOTAL GABON and ELECTRONIC ARTS.
Diversification Opportunities for TOTAL GABON and ELECTRONIC ARTS
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between TOTAL and ELECTRONIC is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding TOTAL GABON and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and TOTAL GABON 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 TOTAL GABON 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 TOTAL GABON i.e., TOTAL GABON and ELECTRONIC ARTS go up and down completely randomly.
Pair Corralation between TOTAL GABON and ELECTRONIC ARTS
Assuming the 90 days trading horizon TOTAL GABON is expected to generate 2.93 times more return on investment than ELECTRONIC ARTS. However, TOTAL GABON is 2.93 times more volatile than ELECTRONIC ARTS. It trades about 0.18 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.43 per unit of risk. If you would invest 15,800 in TOTAL GABON on September 4, 2024 and sell it today you would earn a total of 2,550 from holding TOTAL GABON or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOTAL GABON vs. ELECTRONIC ARTS
Performance |
| Timeline |
| TOTAL GABON |
| ELECTRONIC ARTS |
TOTAL GABON and ELECTRONIC ARTS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOTAL GABON and ELECTRONIC ARTS
The main advantage of trading using opposite TOTAL GABON and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOTAL GABON 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's long position.The idea behind TOTAL GABON 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. TOTAL GABON | ELECTRONIC ARTS vs. Walgreens Boots Alliance | ELECTRONIC ARTS vs. Peak Resources Limited |
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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