Correlation Between Entertainment Arts and Activision Blizzard

By analyzing existing cross correlation between Entertainment Arts Research and Activision Blizzard, you can compare the effects of market volatilities on Entertainment Arts and Activision Blizzard 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 Entertainment Arts with a short position of Activision Blizzard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entertainment Arts and Activision Blizzard.

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Can any of the company-specific risk be diversified away by investing in both Entertainment Arts and Activision Blizzard 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 Entertainment Arts and Activision Blizzard into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Entertainment Arts and Activision Blizzard

0.67
  Correlation Coefficient
Entertainment Arts
Activision Blizzard

Poor diversification

The 3 months correlation between Entertainment and Activision is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Entertainment Arts Research and Activision Blizzard in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Activision Blizzard and Entertainment 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 Entertainment Arts Research are associated (or correlated) with Activision Blizzard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Activision Blizzard has no effect on the direction of Entertainment Arts i.e., Entertainment Arts and Activision Blizzard go up and down completely randomly.

Pair Corralation between Entertainment Arts and Activision Blizzard

Given the investment horizon of 90 days Entertainment Arts Research is expected to generate 12.83 times more return on investment than Activision Blizzard. However, Entertainment Arts is 12.83 times more volatile than Activision Blizzard. It trades about 0.13 of its potential returns per unit of risk. Activision Blizzard is currently generating about -0.09 per unit of risk. If you would invest  1.87  in Entertainment Arts Research on September 2, 2021 and sell it today you would earn a total of  6.43  from holding Entertainment Arts Research or generate 343.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Entertainment Arts Research  vs.  Activision Blizzard

 Performance (%) 
      Timeline 
Entertainment Arts 
Entertainment Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Entertainment Arts Research are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entertainment Arts reported solid returns over the last few months and may actually be approaching a breakup point.

Entertainment Price Channel

Activision Blizzard 
Activision Performance
0 of 100
Over the last 90 days Activision Blizzard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Activision Price Channel

Entertainment Arts and Activision Blizzard Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Entertainment Arts and Activision Blizzard

The main advantage of trading using opposite Entertainment Arts and Activision Blizzard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entertainment Arts position performs unexpectedly, Activision Blizzard 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 Activision Blizzard will offset losses from the drop in Activision Blizzard's long position.
The idea behind Entertainment Arts Research and Activision Blizzard 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.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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