Correlation Between ELECTRONIC ARTS and Santander Bank

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

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

Diversification Opportunities for ELECTRONIC ARTS and Santander Bank

-0.1

Correlation Coefficient

ELECTRONIC ARTS  Santander Bank

Good diversification

The 3 months correlation between ELECTRONIC and Santander is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska 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 Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Santander Bank go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and Santander Bank

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 3.65 times less return on investment than Santander Bank. But when comparing it to its historical volatility, ELECTRONIC ARTS is 3.08 times less risky than Santander Bank. It trades about 0.05 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,519  in Santander Bank Polska on October 2, 2024 and sell it today you would earn a total of  3,161  from holding Santander Bank Polska or generate 42.04% return on investment over 90 days.

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

ELECTRONIC ARTS  vs.  Santander Bank Polska

ELECTRONIC ARTS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ELECTRONIC ARTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Santander Bank Polska

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Santander Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ELECTRONIC ARTS and Santander Bank

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

The idea behind ELECTRONIC ARTS and Santander Bank Polska 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.