Correlation Between AcadeMedia and Electronic Arts

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

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

Diversification Opportunities for AcadeMedia and Electronic Arts

0.04

Correlation Coefficient

AcadeMedia  Electronic Arts

Significant diversification

The 3 months correlation between AcadeMedia and Electronic is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AcadeMedia AB and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and AcadeMedia 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 AcadeMedia AB 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 AcadeMedia i.e., AcadeMedia and Electronic Arts go up and down completely randomly.

Pair Corralation between AcadeMedia and Electronic Arts

Assuming the 90 days trading horizon AcadeMedia AB is expected to generate 0.53 times more return on investment than Electronic Arts. However, AcadeMedia AB is 1.9 times less risky than Electronic Arts. It trades about 0.21 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.01 per unit of risk. If you would invest  6,755  in AcadeMedia AB on December 28, 2024 and sell it today you would earn a total of  1,325  from holding AcadeMedia AB or generate 19.62% return on investment over 90 days.

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

AcadeMedia AB  vs.  Electronic Arts

AcadeMedia AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AcadeMedia AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AcadeMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with AcadeMedia and Electronic Arts

The main advantage of trading using opposite AcadeMedia and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AcadeMedia 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 AcadeMedia AB 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.