Correlation Between Electronic Arts and Bank Of

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

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

Diversification Opportunities for Electronic Arts and Bank Of

0.93

Correlation Coefficient

Electronic Arts  Bank Of

Almost no diversification

The 3 months correlation between Electronic and Bank is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and The Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Bank 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 Bank Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Bank has no effect on the direction of Electronic Arts i.e., Electronic Arts and Bank Of go up and down completely randomly.

Pair Corralation between Electronic Arts and Bank Of

Assuming the 90 days trading horizon Electronic Arts is expected to under-perform the Bank Of. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 1.12 times less risky than Bank Of. The stock trades about -0.19 of its potential returns per unit of risk. The The Bank of is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  46,765  in The Bank of on September 27, 2024 and sell it today you would earn a total of  1,034  from holding The Bank of or generate 2.21% return on investment over 90 days.

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

Electronic Arts  vs.  The Bank of

Electronic Arts

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Electronic Arts sustained solid returns over the last few months and may actually be approaching a breakup point.

The Bank

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Bank Of sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and Bank Of

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

The idea behind Electronic Arts and The Bank of 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.