Correlation Between Bank of Ireland and Electronic Arts

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

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

Diversification Opportunities for Bank of Ireland and Electronic Arts

-0.67

Correlation Coefficient

Bank of Ireland  Electronic Arts

Excellent diversification

The 3 months correlation between Bank and Electronic is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ireland and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Bank of Ireland 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 Bank of Ireland 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 Bank of Ireland i.e., Bank of Ireland and Electronic Arts go up and down completely randomly.

Pair Corralation between Bank of Ireland and Electronic Arts

Assuming the 90 days trading horizon Bank of Ireland is expected to generate 1.66 times more return on investment than Electronic Arts. However, Bank of Ireland is 1.66 times more volatile than Electronic Arts. It trades about 0.1 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.39 per unit of risk. If you would invest  845.00  in Bank of Ireland on September 27, 2024 and sell it today you would earn a total of  35.00  from holding Bank of Ireland or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Bank of Ireland  vs.  Electronic Arts

Bank of Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Ireland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Electronic Arts

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Bank of Ireland and Electronic Arts

The main advantage of trading using opposite Bank of Ireland and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Ireland 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 Bank of Ireland 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.