Correlation Between Electronic Arts and Boyd Gaming

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

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

Diversification Opportunities for Electronic Arts and Boyd Gaming

0.85

Correlation Coefficient

Electronic Arts  Boyd Gaming

Very poor diversification

The 3 months correlation between Electronic and Boyd is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Electronic Arts i.e., Electronic Arts and Boyd Gaming go up and down completely randomly.

Pair Corralation between Electronic Arts and Boyd Gaming

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 3.37 times less return on investment than Boyd Gaming. But when comparing it to its historical volatility, Electronic Arts is 1.35 times less risky than Boyd Gaming. It trades about 0.06 of its potential returns per unit of risk. Boyd Gaming is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,350  in Boyd Gaming on September 29, 2024 and sell it today you would earn a total of  1,865  from holding Boyd Gaming or generate 34.86% return on investment over 90 days.

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

Electronic Arts  vs.  Boyd Gaming

Electronic Arts

Risk-Adjusted Performance

4 of 100

Insignificant

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. 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.

Boyd Gaming

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Boyd Gaming may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Electronic Arts and Boyd Gaming

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

The idea behind Electronic Arts and Boyd Gaming 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.