Correlation Between Electronic Arts and American Express

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

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

Diversification Opportunities for Electronic Arts and American Express

0.12

Correlation Coefficient

Electronic Arts  American Express

Average diversification

The 3 months correlation between Electronic and American is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Electronic Arts i.e., Electronic Arts and American Express go up and down completely randomly.

Pair Corralation between Electronic Arts and American Express

Assuming the 90 days trading horizon Electronic Arts is expected to under-perform the American Express. In addition to that, Electronic Arts is 1.67 times more volatile than American Express. It trades about -0.13 of its total potential returns per unit of risk. American Express is currently generating about 0.03 per unit of volatility. If you would invest  18,108  in American Express on December 5, 2024 and sell it today you would earn a total of  369.00  from holding American Express or generate 2.04% return on investment over 90 days.

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

Electronic Arts  vs.  American Express

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 weak performance in the last few months, the Stock's forward 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.

American Express

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, American Express 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 American Express

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

The idea behind Electronic Arts and American Express 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.