Correlation Between Verizon Communications and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Electronic Arts, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Electronic Arts.
Diversification Opportunities for Verizon Communications and Electronic Arts
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Verizon and Electronic is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Electronic Arts go up and down completely randomly.
Pair Corralation between Verizon Communications and Electronic Arts
Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 1.6 times less return on investment than Electronic Arts. But when comparing it to its historical volatility, Verizon Communications is 1.07 times less risky than Electronic Arts. It trades about 0.3 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.44 of returns per unit of risk over similar time horizon. If you would invest 14,545 in Electronic Arts on August 30, 2024 and sell it today you would earn a total of 1,765 from holding Electronic Arts or generate 12.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Electronic Arts
Performance |
| Timeline |
| Verizon Communications |
| Electronic Arts |
Verizon Communications and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Electronic Arts
The main advantage of trading using opposite Verizon Communications and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Merck Company | Verizon Communications vs. Pharvaris BV | Verizon Communications vs. Brinker International | Verizon Communications vs. Alcoa Corp |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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