Correlation Between Electronic Arts and Sega Sammy

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

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

Diversification Opportunities for Electronic Arts and Sega Sammy

-0.7

Correlation Coefficient

Electronic Arts  Sega Sammy

Excellent diversification

The 3 months correlation between Electronic and Sega is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Sega Sammy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sega Sammy Holdings 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 Sega Sammy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sega Sammy Holdings has no effect on the direction of Electronic Arts i.e., Electronic Arts and Sega Sammy go up and down completely randomly.

Pair Corralation between Electronic Arts and Sega Sammy

Allowing for the 90-day total investment horizon Electronic Arts is expected to under-perform the Sega Sammy. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 1.01 times less risky than Sega Sammy. The stock trades about -0.14 of its potential returns per unit of risk. The Sega Sammy Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Sega Sammy Holdings on December 2, 2024 and sell it today you would earn a total of  54.00  from holding Sega Sammy Holdings or generate 12.41% return on investment over 90 days.

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

Electronic Arts  vs.  Sega Sammy Holdings

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 inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sega Sammy Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sega Sammy Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Sega Sammy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and Sega Sammy

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

The idea behind Electronic Arts and Sega Sammy Holdings 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..