Correlation Between Electronic Arts and CVW CleanTech

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

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

Diversification Opportunities for Electronic Arts and CVW CleanTech

-0.32

Correlation Coefficient

Electronic Arts  CVW CleanTech

Very good diversification

The 3 months correlation between Electronic and CVW is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Electronic Arts i.e., Electronic Arts and CVW CleanTech go up and down completely randomly.

Pair Corralation between Electronic Arts and CVW CleanTech

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.51 times more return on investment than CVW CleanTech. However, Electronic Arts is 1.97 times less risky than CVW CleanTech. It trades about 0.15 of its potential returns per unit of risk. CVW CleanTech is currently generating about -0.07 per unit of risk. If you would invest  14,029  in Electronic Arts on September 18, 2024 and sell it today you would earn a total of  1,445  from holding Electronic Arts or generate 10.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Electronic Arts  vs.  CVW CleanTech

Electronic Arts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Electronic Arts may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Electronic Arts and CVW CleanTech

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

The idea behind Electronic Arts and CVW CleanTech 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.