Correlation Between Associated British and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Electronic Arts, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Electronic Arts.
Diversification Opportunities for Associated British and Electronic Arts
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Associated and Electronic is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Electronic Arts go up and down completely randomly.
Pair Corralation between Associated British and Electronic Arts
Assuming the 90 days trading horizon Associated British Foods is expected to generate 1.06 times more return on investment than Electronic Arts. However, Associated British is 1.06 times more volatile than Electronic Arts. It trades about 0.05 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.04 per unit of risk. If you would invest 156,273 in Associated British Foods on September 24, 2024 and sell it today you would earn a total of 49,127 from holding Associated British Foods or generate 31.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.0% |
Values | Daily Returns |
Associated British Foods vs. Electronic Arts
Performance |
Timeline |
Associated British Foods |
Electronic Arts |
Associated British and Electronic Arts Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Associated British and Electronic Arts
The main advantage of trading using opposite Associated British and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.Associated British vs. Aeorema Communications Plc | Associated British vs. MTI Wireless Edge | Associated British vs. British American Tobacco | Associated British vs. Molson Coors Beverage |
Electronic Arts vs. Leroy Seafood Group | Electronic Arts vs. Flow Traders NV | Electronic Arts vs. Ironveld Plc | Electronic Arts vs. Associated British Foods |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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