Correlation Between British American and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Electronic Arts, you can compare the effects of market volatilities on British American 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 British American with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Electronic Arts.
Diversification Opportunities for British American and Electronic Arts
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between British and Electronic is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and British American 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 British American Tobacco 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 British American i.e., British American and Electronic Arts go up and down completely randomly.
Pair Corralation between British American and Electronic Arts
Assuming the 90 days trading horizon British American is expected to generate 3.92 times less return on investment than Electronic Arts. In addition to that, British American is 1.03 times more volatile than Electronic Arts. It trades about 0.07 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.28 per unit of volatility. If you would invest 40,497 in Electronic Arts on September 11, 2024 and sell it today you would earn a total of 9,653 from holding Electronic Arts or generate 23.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
British American Tobacco vs. Electronic Arts
Performance |
Timeline |
British American Tobacco |
Electronic Arts |
British American and Electronic Arts Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with British American and Electronic Arts
The main advantage of trading using opposite British American and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.British American vs. LIFE CAPITAL PARTNERS | British American vs. EOG Resources | British American vs. Fras le SA | British American vs. Unipar Carbocloro SA |
Electronic Arts vs. Take Two Interactive Software | Electronic Arts vs. LIFE CAPITAL PARTNERS | Electronic Arts vs. EOG Resources | Electronic Arts vs. Fras le SA |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |