Correlation Between Visa and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Electronic Arts, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Electronic Arts.
Diversification Opportunities for Visa and Electronic Arts
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and Electronic is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Visa 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 Visa Class A 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 Visa i.e., Visa and Electronic Arts go up and down completely randomly.
Pair Corralation between Visa and Electronic Arts
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.87 times more return on investment than Electronic Arts. However, Visa Class A is 1.15 times less risky than Electronic Arts. It trades about 0.1 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.06 per unit of risk. If you would invest 22,047 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 9,461 from holding Visa Class A or generate 42.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Visa Class A vs. Electronic Arts
Performance |
| Timeline |
| Visa Class A |
| Electronic Arts |
Visa and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Electronic Arts
The main advantage of trading using opposite Visa and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Electronic Arts vs. Neometals | Electronic Arts vs. Coor Service Management | Electronic Arts vs. Aeorema Communications Plc | Electronic Arts vs. JLEN Environmental Assets |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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