Correlation Between Carnegie Clean and Electronic Arts

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

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

Diversification Opportunities for Carnegie Clean and Electronic Arts

-0.46

Correlation Coefficient

Carnegie Clean  Electronic Arts

Very good diversification

The 3 months correlation between Carnegie and Electronic is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Carnegie Clean 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 Carnegie Clean Energy 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 Carnegie Clean i.e., Carnegie Clean and Electronic Arts go up and down completely randomly.

Pair Corralation between Carnegie Clean and Electronic Arts

Assuming the 90 days trading horizon Carnegie Clean Energy is expected to generate 1.92 times more return on investment than Electronic Arts. However, Carnegie Clean is 1.92 times more volatile than Electronic Arts. It trades about -0.01 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.03 per unit of risk. If you would invest  2.10  in Carnegie Clean Energy on December 24, 2024 and sell it today you would lose (0.22) from holding Carnegie Clean Energy or give up 10.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Carnegie Clean Energy  vs.  Electronic Arts

Carnegie Clean Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carnegie Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Carnegie Clean is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Electronic Arts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Electronic Arts is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carnegie Clean and Electronic Arts

The main advantage of trading using opposite Carnegie Clean and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean 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 Carnegie Clean Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.