Correlation Between Electronic Arts and T Mobile

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

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

Diversification Opportunities for Electronic Arts and T Mobile

0.95

Correlation Coefficient

Electronic Arts  T Mobile

Almost no diversification

The 3 months correlation between Electronic and T1MU34 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and T Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Mobile 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 T Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Mobile has no effect on the direction of Electronic Arts i.e., Electronic Arts and T Mobile go up and down completely randomly.

Pair Corralation between Electronic Arts and T Mobile

Assuming the 90 days trading horizon Electronic Arts is expected to generate 4.28 times less return on investment than T Mobile. But when comparing it to its historical volatility, Electronic Arts is 1.38 times less risky than T Mobile. It trades about 0.03 of its potential returns per unit of risk. T Mobile is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  68,296  in T Mobile on September 17, 2024 and sell it today you would earn a total of  2,054  from holding T Mobile or generate 3.01% 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.  T Mobile

Electronic Arts

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Electronic Arts sustained solid returns over the last few months and may actually be approaching a breakup point.

T Mobile

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, T Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and T Mobile

The main advantage of trading using opposite Electronic Arts and T Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, T Mobile 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 T Mobile will offset losses from the drop in T Mobile's long position.

The idea behind Electronic Arts and T Mobile 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.