Correlation Between Electronic Arts and GSTechnologies

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

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

Diversification Opportunities for Electronic Arts and GSTechnologies

0.31

Correlation Coefficient

Electronic Arts  GSTechnologies

Weak diversification

The 3 months correlation between Electronic and GSTechnologies is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of Electronic Arts i.e., Electronic Arts and GSTechnologies go up and down completely randomly.

Pair Corralation between Electronic Arts and GSTechnologies

Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.38 times more return on investment than GSTechnologies. However, Electronic Arts is 2.66 times less risky than GSTechnologies. It trades about 0.01 of its potential returns per unit of risk. GSTechnologies is currently generating about -0.07 per unit of risk. If you would invest  14,697  in Electronic Arts on December 28, 2024 and sell it today you would lose (162.00) from holding Electronic Arts or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Electronic Arts  vs.  GSTechnologies

Electronic Arts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Electronic Arts is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

GSTechnologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days GSTechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Electronic Arts and GSTechnologies

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

The idea behind Electronic Arts and GSTechnologies 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.