Correlation Between Western Digital and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Western Digital 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 Western Digital and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Electronic Arts, you can compare the effects of market volatilities on Western Digital 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 Western Digital with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Electronic Arts.
Diversification Opportunities for Western Digital and Electronic Arts
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Electronic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and Electronic Arts go up and down completely randomly.
Pair Corralation between Western Digital and Electronic Arts
Assuming the 90 days trading horizon Western Digital is expected to generate 1.95 times more return on investment than Electronic Arts. However, Western Digital is 1.95 times more volatile than Electronic Arts. It trades about 0.13 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.24 per unit of risk. If you would invest 36,225 in Western Digital on September 12, 2024 and sell it today you would earn a total of 6,990 from holding Western Digital or generate 19.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Western Digital vs. Electronic Arts
Performance |
| Timeline |
| Western Digital |
| Electronic Arts |
Western Digital and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and Electronic Arts
The main advantage of trading using opposite Western Digital and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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.| Western Digital vs. Electronic Arts | Western Digital vs. Healthpeak Properties | Western Digital vs. Paycom Software | Western Digital vs. Metalrgica Riosulense SA |
| Electronic Arts vs. Bank of America | Electronic Arts vs. Sumitomo Mitsui Financial | Electronic Arts vs. Metalrgica Riosulense SA | Electronic Arts vs. Ameriprise Financial |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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