Correlation Between Cornish Metals and Electronic Arts

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

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

Diversification Opportunities for Cornish Metals and Electronic Arts

0.47

Correlation Coefficient

Cornish Metals  Electronic Arts

Very weak diversification

The 3 months correlation between Cornish and Electronic is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cornish Metals and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Cornish Metals 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 Cornish Metals 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 Cornish Metals i.e., Cornish Metals and Electronic Arts go up and down completely randomly.

Pair Corralation between Cornish Metals and Electronic Arts

Assuming the 90 days trading horizon Cornish Metals is expected to generate 3.25 times more return on investment than Electronic Arts. However, Cornish Metals is 3.25 times more volatile than Electronic Arts. It trades about 0.15 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.09 per unit of risk. If you would invest  640.00  in Cornish Metals on September 22, 2024 and sell it today you would earn a total of  225.00  from holding Cornish Metals or generate 35.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Cornish Metals  vs.  Electronic Arts

Cornish Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cornish Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cornish Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Electronic Arts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Electronic Arts is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cornish Metals and Electronic Arts

The main advantage of trading using opposite Cornish Metals and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornish Metals 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 Cornish Metals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.