Correlation Between Electronic Arts and Roku

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

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

Diversification Opportunities for Electronic Arts and Roku

-0.35

Correlation Coefficient

Electronic Arts  Roku

Very good diversification

The 3 months correlation between Electronic and Roku is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Roku Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roku 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 Roku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roku Inc has no effect on the direction of Electronic Arts i.e., Electronic Arts and Roku go up and down completely randomly.

Pair Corralation between Electronic Arts and Roku

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 2.61 times less return on investment than Roku. But when comparing it to its historical volatility, Electronic Arts is 3.35 times less risky than Roku. It trades about 0.06 of its potential returns per unit of risk. Roku Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,915  in Roku Inc on September 3, 2024 and sell it today you would earn a total of  2,790  from holding Roku Inc or generate 56.77% 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.  Roku Inc

Electronic Arts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Electronic Arts sustained solid returns over the last few months and may actually be approaching a breakup point.

Roku Inc

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roku Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Roku unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and Roku

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

The idea behind Electronic Arts and Roku 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.