Correlation Between ELECTRONIC ARTS and MongoDB

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

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

Diversification Opportunities for ELECTRONIC ARTS and MongoDB

-0.41

Correlation Coefficient

ELECTRONIC ARTS  MongoDB

Very good diversification

The 3 months correlation between ELECTRONIC and MongoDB is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and MongoDB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MongoDB 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 MongoDB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MongoDB has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and MongoDB go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and MongoDB

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.55 times more return on investment than MongoDB. However, ELECTRONIC ARTS is 1.8 times less risky than MongoDB. It trades about -0.04 of its potential returns per unit of risk. MongoDB is currently generating about -0.07 per unit of risk. If you would invest  14,248  in ELECTRONIC ARTS on December 24, 2024 and sell it today you would lose (1,096) from holding ELECTRONIC ARTS or give up 7.69% of portfolio value over 90 days.

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

ELECTRONIC ARTS  vs.  MongoDB

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

MongoDB

Risk-Adjusted Performance

Very Weak

Over the last 90 days MongoDB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ELECTRONIC ARTS and MongoDB

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

The idea behind ELECTRONIC ARTS and MongoDB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.