Correlation Between Ameriprise Financial and Electronic Arts

Can any of the company-specific risk be diversified away by investing in both Ameriprise Financial 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 Ameriprise Financial and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ameriprise Financial and Electronic Arts, you can compare the effects of market volatilities on Ameriprise Financial 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 Ameriprise Financial with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and Electronic Arts.

Diversification Opportunities for Ameriprise Financial and Electronic Arts

0.9

Correlation Coefficient

Ameriprise Financial  Electronic Arts

Almost no diversification

The 3 months correlation between Ameriprise and Electronic is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Ameriprise Financial 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 Ameriprise Financial 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 Ameriprise Financial i.e., Ameriprise Financial and Electronic Arts go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Electronic Arts

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 1.12 times more return on investment than Electronic Arts. However, Ameriprise Financial is 1.12 times more volatile than Electronic Arts. It trades about 0.2 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.13 per unit of risk. If you would invest  44,569  in Ameriprise Financial on September 5, 2024 and sell it today you would earn a total of  40,176  from holding Ameriprise Financial or generate 90.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.37%
Values	Daily Returns

Ameriprise Financial  vs.  Electronic Arts

Ameriprise Financial

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Ameriprise Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Electronic Arts

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Electronic Arts sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameriprise Financial and Electronic Arts

The main advantage of trading using opposite Ameriprise Financial and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial 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.

The idea behind Ameriprise Financial 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.