Correlation Between Software Circle and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Software Circle 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 Software Circle and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Software Circle plc and Electronic Arts, you can compare the effects of market volatilities on Software Circle 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 Software Circle with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Software Circle and Electronic Arts.
Diversification Opportunities for Software Circle and Electronic Arts
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Software and Electronic is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Software Circle plc and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Software Circle 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 Software Circle 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 Software Circle i.e., Software Circle and Electronic Arts go up and down completely randomly.
Pair Corralation between Software Circle and Electronic Arts
Assuming the 90 days trading horizon Software Circle plc is expected to generate 0.27 times more return on investment than Electronic Arts. However, Software Circle plc is 3.71 times less risky 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 2,350 in Software Circle plc on November 6, 2024 and sell it today you would earn a total of 100.00 from holding Software Circle plc or generate 4.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Software Circle plc vs. Electronic Arts
Performance |
| Timeline |
| Software Circle plc |
| Electronic Arts |
Software Circle and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Software Circle and Electronic Arts
The main advantage of trading using opposite Software Circle and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Software Circle 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.| Software Circle vs. PureTech Health plc | Software Circle vs. Bellevue Healthcare Trust | Software Circle vs. Target Healthcare REIT | Software Circle vs. Delta Air Lines |
| Electronic Arts vs. Coeur Mining | Electronic Arts vs. Wheaton Precious Metals | Electronic Arts vs. AMG Advanced Metallurgical | Electronic Arts vs. Empire Metals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |