Correlation Between Electronic Arts and Santos Brasil

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

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

Diversification Opportunities for Electronic Arts and Santos Brasil

-0.09

Correlation Coefficient

Electronic Arts  Santos Brasil

Good diversification

The 3 months correlation between Electronic and Santos is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Santos Brasil Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santos Brasil Participaes 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 Santos Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santos Brasil Participaes has no effect on the direction of Electronic Arts i.e., Electronic Arts and Santos Brasil go up and down completely randomly.

Pair Corralation between Electronic Arts and Santos Brasil

Assuming the 90 days trading horizon Electronic Arts is expected to under-perform the Santos Brasil. In addition to that, Electronic Arts is 1.68 times more volatile than Santos Brasil Participaes. It trades about -0.54 of its total potential returns per unit of risk. Santos Brasil Participaes is currently generating about 0.14 per unit of volatility. If you would invest  1,297  in Santos Brasil Participaes on October 25, 2024 and sell it today you would earn a total of  15.00  from holding Santos Brasil Participaes or generate 1.16% return on investment over 90 days.

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

Electronic Arts  vs.  Santos Brasil Participaes

Electronic Arts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Electronic Arts is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Santos Brasil Participaes

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Santos Brasil Participaes are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Santos Brasil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Electronic Arts and Santos Brasil

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

The idea behind Electronic Arts and Santos Brasil Participaes 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.