Correlation Between Nexters Warrant and Electronic Arts

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

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

Diversification Opportunities for Nexters Warrant and Electronic Arts

0.81

Correlation Coefficient

Nexters Warrant  Electronic Arts

Very poor diversification

The 3 months correlation between Nexters and Electronic is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nexters Warrant and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Nexters Warrant 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 Nexters Warrant 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 Nexters Warrant i.e., Nexters Warrant and Electronic Arts go up and down completely randomly.

Pair Corralation between Nexters Warrant and Electronic Arts

Assuming the 90 days horizon Nexters Warrant is expected to generate 3.03 times more return on investment than Electronic Arts. However, Nexters Warrant is 3.03 times more volatile than Electronic Arts. It trades about 0.32 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.29 per unit of risk. If you would invest  7.02  in Nexters Warrant on January 31, 2024 and sell it today you would earn a total of  0.48  from holding Nexters Warrant or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	21.95%
Values	Daily Returns

Nexters Warrant  vs.  Electronic Arts

Nexters Warrant

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Nexters Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Nexters Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Electronic Arts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nexters Warrant and Electronic Arts

The main advantage of trading using opposite Nexters Warrant and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexters Warrant 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 Nexters Warrant 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.