Correlation Between Electronic Arts and NXP Semiconductors
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and NXP Semiconductors 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 NXP Semiconductors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and NXP Semiconductors NV, you can compare the effects of market volatilities on Electronic Arts and NXP Semiconductors 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 NXP Semiconductors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and NXP Semiconductors.
Diversification Opportunities for Electronic Arts and NXP Semiconductors
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Electronic and NXP is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and NXP Semiconductors NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NXP Semiconductors 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 NXP Semiconductors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NXP Semiconductors has no effect on the direction of Electronic Arts i.e., Electronic Arts and NXP Semiconductors go up and down completely randomly.
Pair Corralation between Electronic Arts and NXP Semiconductors
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.44 times more return on investment than NXP Semiconductors. However, Electronic Arts is 2.28 times less risky than NXP Semiconductors. It trades about 0.56 of its potential returns per unit of risk. NXP Semiconductors NV is currently generating about 0.24 per unit of risk. If you would invest 44,362 in Electronic Arts on September 6, 2024 and sell it today you would earn a total of 5,618 from holding Electronic Arts or generate 12.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Electronic Arts vs. NXP Semiconductors NV
Performance |
Timeline |
Electronic Arts |
NXP Semiconductors |
Electronic Arts and NXP Semiconductors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Electronic Arts and NXP Semiconductors
The main advantage of trading using opposite Electronic Arts and NXP Semiconductors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, NXP Semiconductors 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 NXP Semiconductors will offset losses from the drop in NXP Semiconductors' long position.Electronic Arts vs. American Airlines Group | Electronic Arts vs. Charter Communications | Electronic Arts vs. United Rentals | Electronic Arts vs. SVB Financial Group |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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