Correlation Between Electronic Arts and Chemours

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

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

Diversification Opportunities for Electronic Arts and Chemours

0.54

Correlation Coefficient

Electronic Arts  Chemours

Very weak diversification

The 3 months correlation between Electronic and Chemours is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours and Electronic Arts 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 Electronic Arts are associated (or correlated) with Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Electronic Arts i.e., Electronic Arts and Chemours go up and down completely randomly.

Pair Corralation between Electronic Arts and Chemours

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.49 times more return on investment than Chemours. However, Electronic Arts is 2.03 times less risky than Chemours. It trades about -0.42 of its potential returns per unit of risk. Chemours Co is currently generating about -0.42 per unit of risk. If you would invest  16,395  in Electronic Arts on September 24, 2024 and sell it today you would lose (1,615) from holding Electronic Arts or give up 9.85% of portfolio value over 90 days.

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

Electronic Arts  vs.  Chemours Co

Electronic Arts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

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 rather sound fundamental indicators, Chemours is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Electronic Arts and Chemours

The main advantage of trading using opposite Electronic Arts and Chemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Chemours 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 Chemours will offset losses from the drop in Chemours' long position.

The idea behind Electronic Arts and Chemours Co 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.