Correlation Between ELECTRONIC ARTS and Nufarm
Can any of the company-specific risk be diversified away by investing in both ELECTRONIC ARTS and Nufarm 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 Nufarm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ELECTRONIC ARTS and Nufarm Limited, you can compare the effects of market volatilities on ELECTRONIC ARTS and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and Nufarm.
Diversification Opportunities for ELECTRONIC ARTS and Nufarm
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between ELECTRONIC and Nufarm is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Nufarm go up and down completely randomly.
Pair Corralation between ELECTRONIC ARTS and Nufarm
Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.73 times more return on investment than Nufarm. However, ELECTRONIC ARTS is 1.37 times less risky than Nufarm. It trades about -0.4 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.41 per unit of risk. If you would invest 15,921 in ELECTRONIC ARTS on September 26, 2024 and sell it today you would lose (1,723) from holding ELECTRONIC ARTS or give up 10.82% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ELECTRONIC ARTS vs. Nufarm Limited
Performance |
Timeline |
ELECTRONIC ARTS |
Nufarm Limited |
ELECTRONIC ARTS and Nufarm Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ELECTRONIC ARTS and Nufarm
The main advantage of trading using opposite ELECTRONIC ARTS and Nufarm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ELECTRONIC ARTS position performs unexpectedly, Nufarm 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 Nufarm will offset losses from the drop in Nufarm's long position.ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Apple Inc | ELECTRONIC ARTS vs. Microsoft | ELECTRONIC ARTS vs. Microsoft |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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