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

-0.18

Correlation Coefficient

Electronic Arts  Sega Sammy

Good diversification

The 3 months correlation between Electronic and Sega is -0.18. 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 generate 3.05 times less return on investment than Sega Sammy. In addition to that, Electronic Arts is 1.29 times more volatile than Sega Sammy Holdings. It trades about 0.01 of its total potential returns per unit of risk. Sega Sammy Holdings is currently generating about 0.02 per unit of volatility. If you would invest  489.00  in Sega Sammy Holdings on December 28, 2024 and sell it today you would earn a total of  7.00  from holding Sega Sammy Holdings or generate 1.43% 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.  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 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.

Sega Sammy Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sega Sammy Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Sega Sammy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.