Correlation Between Nasdaq and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Electronic Arts, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Electronic Arts.
Diversification Opportunities for Nasdaq and Electronic Arts
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nasdaq and Electronic is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Electronic Arts go up and down completely randomly.
Pair Corralation between Nasdaq and Electronic Arts
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 1.2 times more return on investment than Electronic Arts. However, Nasdaq is 1.2 times more volatile than Electronic Arts. It trades about 0.08 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.13 per unit of risk. If you would invest 5,840 in Nasdaq Inc on January 26, 2024 and sell it today you would earn a total of 310.00 from holding Nasdaq Inc or generate 5.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Electronic Arts
Performance |
| Timeline |
| Nasdaq Inc |
| Electronic Arts |
Nasdaq and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Electronic Arts
The main advantage of trading using opposite Nasdaq and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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.| Electronic Arts vs. Mobile Global Esports | Electronic Arts vs. GD Culture Group | Electronic Arts vs. Playstudios | Electronic Arts vs. Tiidal Gaming Group |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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