Correlation Between VERISK ANLYTCS and Electronic Arts

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

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

Diversification Opportunities for VERISK ANLYTCS and Electronic Arts

0.93

Correlation Coefficient

VERISK ANLYTCS  Electronic Arts

Almost no diversification

The 3 months correlation between VERISK and Electronic is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding VERISK ANLYTCS A and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and VERISK ANLYTCS 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 VERISK ANLYTCS A 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 VERISK ANLYTCS i.e., VERISK ANLYTCS and Electronic Arts go up and down completely randomly.

Pair Corralation between VERISK ANLYTCS and Electronic Arts

Assuming the 90 days trading horizon VERISK ANLYTCS A is expected to generate 0.74 times more return on investment than Electronic Arts. However, VERISK ANLYTCS A is 1.35 times less risky than Electronic Arts. It trades about 0.1 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.05 per unit of risk. If you would invest  21,263  in VERISK ANLYTCS A on October 7, 2024 and sell it today you would earn a total of  5,367  from holding VERISK ANLYTCS A or generate 25.24% return on investment over 90 days.

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

VERISK ANLYTCS A  vs.  Electronic Arts

VERISK ANLYTCS A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VERISK ANLYTCS A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, VERISK ANLYTCS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Electronic Arts

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Electronic Arts may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VERISK ANLYTCS and Electronic Arts

The main advantage of trading using opposite VERISK ANLYTCS and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VERISK ANLYTCS 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 VERISK ANLYTCS A 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.