Correlation Between Chemours and Electronic Arts

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

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

Diversification Opportunities for Chemours and Electronic Arts

0.64

Correlation Coefficient

Chemours  Electronic Arts

Poor diversification

The 3 months correlation between Chemours and Electronic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Chemours Co and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Chemours 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 Chemours Co 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 Chemours i.e., Chemours and Electronic Arts go up and down completely randomly.

Pair Corralation between Chemours and Electronic Arts

Allowing for the 90-day total investment horizon Chemours Co is expected to under-perform the Electronic Arts. In addition to that, Chemours is 2.72 times more volatile than Electronic Arts. It trades about -0.05 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.02 per unit of volatility. If you would invest  13,720  in Electronic Arts on October 13, 2024 and sell it today you would earn a total of  365.00  from holding Electronic Arts or generate 2.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Chemours Co  vs.  Electronic Arts

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Electronic Arts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Electronic Arts is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chemours and Electronic Arts

The main advantage of trading using opposite Chemours and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemours 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 Chemours Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.