Correlation Between FREEPORT and Electronic Arts

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

By analyzing existing cross correlation between FREEPORT MCMORAN INC 525 and Electronic Arts, you can compare the effects of market volatilities on FREEPORT 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 FREEPORT with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREEPORT and Electronic Arts.

Diversification Opportunities for FREEPORT and Electronic Arts

0.26

Correlation Coefficient

FREEPORT  Electronic Arts

Modest diversification

The 3 months correlation between FREEPORT and Electronic is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding FREEPORT MCMORAN INC 525 and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and FREEPORT 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 FREEPORT MCMORAN INC 525 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 FREEPORT i.e., FREEPORT and Electronic Arts go up and down completely randomly.

Pair Corralation between FREEPORT and Electronic Arts

Assuming the 90 days trading horizon FREEPORT is expected to generate 10.34 times less return on investment than Electronic Arts. But when comparing it to its historical volatility, FREEPORT MCMORAN INC 525 is 1.95 times less risky than Electronic Arts. It trades about 0.01 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  12,499  in Electronic Arts on October 3, 2024 and sell it today you would earn a total of  2,131  from holding Electronic Arts or generate 17.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

FREEPORT MCMORAN INC 525  vs.  Electronic Arts

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 525 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Electronic Arts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 4 (%) 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.

Pair Trading with FREEPORT and Electronic Arts

The main advantage of trading using opposite FREEPORT and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FREEPORT 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 FREEPORT MCMORAN INC 525 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.