Correlation Between BYD ELECTRONIC and ELECTRONIC ARTS

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

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

Diversification Opportunities for BYD ELECTRONIC and ELECTRONIC ARTS

-0.61

Correlation Coefficient

BYD ELECTRONIC  ELECTRONIC ARTS

Excellent diversification

The 3 months correlation between BYD and ELECTRONIC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BYD ELECTRONIC and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and BYD ELECTRONIC 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 BYD ELECTRONIC 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 BYD ELECTRONIC i.e., BYD ELECTRONIC and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between BYD ELECTRONIC and ELECTRONIC ARTS

Assuming the 90 days trading horizon BYD ELECTRONIC is expected to generate 2.62 times more return on investment than ELECTRONIC ARTS. However, BYD ELECTRONIC is 2.62 times more volatile than ELECTRONIC ARTS. It trades about 0.17 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about -0.13 per unit of risk. If you would invest  414.00  in BYD ELECTRONIC on November 29, 2024 and sell it today you would earn a total of  272.00  from holding BYD ELECTRONIC or generate 65.7% return on investment over 90 days.

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

BYD ELECTRONIC  vs.  ELECTRONIC ARTS

BYD ELECTRONIC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BYD ELECTRONIC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BYD ELECTRONIC 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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BYD ELECTRONIC and ELECTRONIC ARTS

The main advantage of trading using opposite BYD ELECTRONIC and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD ELECTRONIC 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's long position.

The idea behind BYD ELECTRONIC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.