Correlation Between ELECTRONIC ARTS and ECHO INVESTMENT

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

By analyzing existing cross correlation between ELECTRONIC ARTS and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on ELECTRONIC ARTS and ECHO INVESTMENT 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 ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and ECHO INVESTMENT.

Diversification Opportunities for ELECTRONIC ARTS and ECHO INVESTMENT

0.4

Correlation Coefficient

ELECTRONIC ARTS  ECHO INVESTMENT

Very weak diversification

The 3 months correlation between ELECTRONIC and ECHO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY 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 ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and ECHO INVESTMENT

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 1.5 times more return on investment than ECHO INVESTMENT. However, ELECTRONIC ARTS is 1.5 times more volatile than ECHO INVESTMENT ZY. It trades about -0.02 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about -0.03 per unit of risk. If you would invest  14,107  in ELECTRONIC ARTS on December 30, 2024 and sell it today you would lose (659.00) from holding ELECTRONIC ARTS or give up 4.67% of portfolio value over 90 days.

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

ELECTRONIC ARTS  vs.  ECHO INVESTMENT ZY

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. In spite of rather sound basic indicators, ELECTRONIC ARTS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ECHO INVESTMENT ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ECHO INVESTMENT is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ELECTRONIC ARTS and ECHO INVESTMENT

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

The idea behind ELECTRONIC ARTS and ECHO INVESTMENT ZY 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.