Correlation Between ELECTRONIC ARTS and Corticeira Amorim

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

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

Diversification Opportunities for ELECTRONIC ARTS and Corticeira Amorim

-0.78

Correlation Coefficient

ELECTRONIC ARTS  Corticeira Amorim

Pay attention - limited upside

The 3 months correlation between ELECTRONIC and Corticeira is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Corticeira Amorim SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corticeira Amorim SGPS 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 Corticeira Amorim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corticeira Amorim SGPS has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Corticeira Amorim go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and Corticeira Amorim

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to under-perform the Corticeira Amorim. In addition to that, ELECTRONIC ARTS is 2.37 times more volatile than Corticeira Amorim SGPS. It trades about -0.02 of its total potential returns per unit of risk. Corticeira Amorim SGPS is currently generating about 0.01 per unit of volatility. If you would invest  795.00  in Corticeira Amorim SGPS on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Corticeira Amorim SGPS or generate 0.13% return on investment over 90 days.

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

ELECTRONIC ARTS  vs.  Corticeira Amorim SGPS

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.

Corticeira Amorim SGPS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corticeira Amorim SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Corticeira Amorim 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 Corticeira Amorim

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

The idea behind ELECTRONIC ARTS and Corticeira Amorim SGPS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.