Correlation Between Electronic Arts and Tyson Foods
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Tyson Foods 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 Tyson Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Tyson Foods, you can compare the effects of market volatilities on Electronic Arts and Tyson Foods 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 Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Tyson Foods.
Diversification Opportunities for Electronic Arts and Tyson Foods
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Electronic and Tyson is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods 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 Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of Electronic Arts i.e., Electronic Arts and Tyson Foods go up and down completely randomly.
Pair Corralation between Electronic Arts and Tyson Foods
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.89 times more return on investment than Tyson Foods. However, Electronic Arts is 1.12 times less risky than Tyson Foods. It trades about 0.04 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.02 per unit of risk. If you would invest 13,424 in Electronic Arts on October 2, 2024 and sell it today you would earn a total of 1,230 from holding Electronic Arts or generate 9.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Electronic Arts vs. Tyson Foods
Performance |
Timeline |
Electronic Arts |
Tyson Foods |
Electronic Arts and Tyson Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Electronic Arts and Tyson Foods
The main advantage of trading using opposite Electronic Arts and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Tyson Foods 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 Tyson Foods will offset losses from the drop in Tyson Foods' long position.Electronic Arts vs. GDEV Inc | Electronic Arts vs. AEye Inc | Electronic Arts vs. Arqit Quantum Warrants | Electronic Arts vs. Xos Equity Warrants |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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