Correlation Between Electronic Arts and BCE

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

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

Diversification Opportunities for Electronic Arts and BCE

-0.3

Correlation Coefficient

Electronic Arts  BCE

Very good diversification

The 3 months correlation between Electronic and BCE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Electronic Arts i.e., Electronic Arts and BCE go up and down completely randomly.

Pair Corralation between Electronic Arts and BCE

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 3.6 times less return on investment than BCE. In addition to that, Electronic Arts is 1.53 times more volatile than BCE Inc. It trades about 0.01 of its total potential returns per unit of risk. BCE Inc is currently generating about 0.06 per unit of volatility. If you would invest  2,189  in BCE Inc on December 28, 2024 and sell it today you would earn a total of  127.00  from holding BCE Inc or generate 5.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Electronic Arts  vs.  BCE Inc

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. Despite somewhat strong basic indicators, Electronic Arts is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BCE Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCE Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, BCE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Electronic Arts and BCE

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

The idea behind Electronic Arts and BCE Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.