Correlation Between Electronic Arts and CECO Environmental
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and CECO Environmental 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 CECO Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and CECO Environmental Corp, you can compare the effects of market volatilities on Electronic Arts and CECO Environmental 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 CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and CECO Environmental.
Diversification Opportunities for Electronic Arts and CECO Environmental
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Electronic and CECO is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp 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 CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of Electronic Arts i.e., Electronic Arts and CECO Environmental go up and down completely randomly.
Pair Corralation between Electronic Arts and CECO Environmental
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 0.53 times more return on investment than CECO Environmental. However, Electronic Arts is 1.89 times less risky than CECO Environmental. It trades about -0.37 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about -0.24 per unit of risk. If you would invest 16,395 in Electronic Arts on September 25, 2024 and sell it today you would lose (1,477) from holding Electronic Arts or give up 9.01% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Electronic Arts vs. CECO Environmental Corp
Performance |
Timeline |
Electronic Arts |
CECO Environmental Corp |
Electronic Arts and CECO Environmental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Electronic Arts and CECO Environmental
The main advantage of trading using opposite Electronic Arts and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, CECO Environmental 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 CECO Environmental will offset losses from the drop in CECO Environmental's long position.Electronic Arts vs. Nintendo Co ADR | Electronic Arts vs. Roblox Corp | Electronic Arts vs. NetEase | Electronic Arts vs. Take Two Interactive Software |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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