Correlation Between Electronic Arts and IQIYI

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

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

Diversification Opportunities for Electronic Arts and IQIYI

-0.22

Correlation Coefficient

Electronic Arts  IQIYI

Very good diversification

The 3 months correlation between Electronic and IQIYI is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and iQIYI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iQIYI 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 IQIYI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iQIYI Inc has no effect on the direction of Electronic Arts i.e., Electronic Arts and IQIYI go up and down completely randomly.

Pair Corralation between Electronic Arts and IQIYI

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 18.33 times less return on investment than IQIYI. But when comparing it to its historical volatility, Electronic Arts is 1.63 times less risky than IQIYI. It trades about 0.01 of its potential returns per unit of risk. iQIYI Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  202.00  in iQIYI Inc on December 28, 2024 and sell it today you would earn a total of  23.00  from holding iQIYI Inc or generate 11.39% return on investment over 90 days.

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

Electronic Arts  vs.  iQIYI 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.

iQIYI Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and IQIYI

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

The idea behind Electronic Arts and iQIYI 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.