Correlation Between Corporate Travel and Electronic Arts

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

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

Diversification Opportunities for Corporate Travel and Electronic Arts

0.39

Correlation Coefficient

Corporate Travel  Electronic Arts

Weak diversification

The 3 months correlation between Corporate and Electronic is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Corporate Travel Management and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Corporate Travel 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 Corporate Travel Management 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 Corporate Travel i.e., Corporate Travel and Electronic Arts go up and down completely randomly.

Pair Corralation between Corporate Travel and Electronic Arts

Assuming the 90 days trading horizon Corporate Travel Management is expected to generate 0.91 times more return on investment than Electronic Arts. However, Corporate Travel Management is 1.1 times less risky than Electronic Arts. It trades about 0.16 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.1 per unit of risk. If you would invest  700.00  in Corporate Travel Management on October 27, 2024 and sell it today you would earn a total of  170.00  from holding Corporate Travel Management or generate 24.29% return on investment over 90 days.

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

Corporate Travel Management  vs.  Electronic Arts

Corporate Travel Man

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corporate Travel Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Corporate Travel unveiled 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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Corporate Travel and Electronic Arts

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

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.