Correlation Between Disney and Electronic Arts
Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walt Disney and Electronic Arts, you can compare the effects of market volatilities on Disney 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 Disney with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and Electronic Arts.
Diversification Opportunities for Disney and Electronic Arts
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Disney and Electronic is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Disney 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 Walt Disney 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 Disney i.e., Disney and Electronic Arts go up and down completely randomly.
Pair Corralation between Disney and Electronic Arts
Considering the 90-day investment horizon Walt Disney is expected to generate 1.92 times more return on investment than Electronic Arts. However, Disney is 1.92 times more volatile than Electronic Arts. It trades about 0.16 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.13 per unit of risk. If you would invest 9,536 in Walt Disney on January 26, 2024 and sell it today you would earn a total of 1,856 from holding Walt Disney or generate 19.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walt Disney vs. Electronic Arts
Performance |
| Timeline |
| Walt Disney |
| Electronic Arts |
Disney and Electronic Arts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disney and Electronic Arts
The main advantage of trading using opposite Disney and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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.| Disney vs. Roku Inc | Disney vs. Paramount Global Class | Disney vs. Warner Bros Discovery | Disney vs. Paramount Global Class |
| Electronic Arts vs. i3 Interactive | Electronic Arts vs. GameSquare Holdings | Electronic Arts vs. IGG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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