Correlation Between ELECTRONIC ARTS and Man Wah

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

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

Diversification Opportunities for ELECTRONIC ARTS and Man Wah

0.12

Correlation Coefficient

ELECTRONIC ARTS  Man Wah

Average diversification

The 3 months correlation between ELECTRONIC and Man is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Man Wah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Man Wah Holdings 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 Man Wah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Man Wah Holdings has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Man Wah go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and Man Wah

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to under-perform the Man Wah. But the stock apears to be less risky and, when comparing its historical volatility, ELECTRONIC ARTS is 1.46 times less risky than Man Wah. The stock trades about -0.05 of its potential returns per unit of risk. The Man Wah Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  56.00  in Man Wah Holdings on December 21, 2024 and sell it today you would lose (3.00) from holding Man Wah Holdings or give up 5.36% of portfolio value over 90 days.

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

ELECTRONIC ARTS  vs.  Man Wah Holdings

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.

Man Wah Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ELECTRONIC ARTS and Man Wah

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

The idea behind ELECTRONIC ARTS and Man Wah Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.