Correlation Between Stepan and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Stepan 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 Stepan and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Electronic Arts, you can compare the effects of market volatilities on Stepan 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 Stepan with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Electronic Arts.
Diversification Opportunities for Stepan and Electronic Arts
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Stepan and Electronic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Stepan 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 Stepan Company 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 Stepan i.e., Stepan and Electronic Arts go up and down completely randomly.
Pair Corralation between Stepan and Electronic Arts
Considering the 90-day investment horizon Stepan is expected to generate 5.99 times less return on investment than Electronic Arts. In addition to that, Stepan is 1.9 times more volatile than Electronic Arts. It trades about 0.03 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.29 per unit of volatility. If you would invest 14,400 in Electronic Arts on September 13, 2024 and sell it today you would earn a total of 1,950 from holding Electronic Arts or generate 13.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 97.67% |
Values | Daily Returns |
Stepan Company vs. Electronic Arts
Performance |
Timeline |
Stepan Company |
Electronic Arts |
Stepan and Electronic Arts Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Stepan and Electronic Arts
The main advantage of trading using opposite Stepan and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan 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.Stepan vs. LyondellBasell Industries NV | Stepan vs. International Flavors Fragrances | Stepan vs. Cabot | Stepan vs. Westlake Chemical |
Electronic Arts vs. Doubledown Interactive Co | Electronic Arts vs. GD Culture Group | Electronic Arts vs. GameSquare Holdings | Electronic Arts vs. GDEV Inc |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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