Correlation Between Electronic Arts and Bankers Investment

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

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

Diversification Opportunities for Electronic Arts and Bankers Investment

0.73

Correlation Coefficient

Electronic Arts  Bankers Investment

Poor diversification

The 3 months correlation between Electronic and Bankers is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust and Electronic 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 Electronic Arts are associated (or correlated) with Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of Electronic Arts i.e., Electronic Arts and Bankers Investment go up and down completely randomly.

Pair Corralation between Electronic Arts and Bankers Investment

Assuming the 90 days trading horizon Electronic Arts is expected to generate 1.46 times more return on investment than Bankers Investment. However, Electronic Arts is 1.46 times more volatile than Bankers Investment Trust. It trades about 0.17 of its potential returns per unit of risk. Bankers Investment Trust is currently generating about 0.13 per unit of risk. If you would invest  14,754  in Electronic Arts on September 3, 2024 and sell it today you would earn a total of  1,613  from holding Electronic Arts or generate 10.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Electronic Arts  vs.  Bankers Investment Trust

Electronic Arts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Electronic Arts may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bankers Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Electronic Arts and Bankers Investment

The main advantage of trading using opposite Electronic Arts and Bankers Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Bankers Investment 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 Bankers Investment will offset losses from the drop in Bankers Investment's long position.

The idea behind Electronic Arts and Bankers Investment Trust 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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.