Correlation Between Electronic Arts and Hess

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

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

Diversification Opportunities for Electronic Arts and Hess

0.1

Correlation Coefficient

Electronic Arts  Hess

Average diversification

The 3 months correlation between Electronic and Hess is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Electronic Arts i.e., Electronic Arts and Hess go up and down completely randomly.

Pair Corralation between Electronic Arts and Hess

Assuming the 90 days trading horizon Electronic Arts is expected to generate 1.4 times more return on investment than Hess. However, Electronic Arts is 1.4 times more volatile than Hess Corporation. It trades about 0.05 of its potential returns per unit of risk. Hess Corporation is currently generating about 0.01 per unit of risk. If you would invest  32,500  in Electronic Arts on October 11, 2024 and sell it today you would earn a total of  11,321  from holding Electronic Arts or generate 34.83% 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.  Hess Corp.

Electronic Arts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Electronic Arts may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess 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 Hess

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

The idea behind Electronic Arts and Hess Corporation 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.