Correlation Between ELECTRONIC ARTS and Halliburton

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

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

Diversification Opportunities for ELECTRONIC ARTS and Halliburton

0.71

Correlation Coefficient

ELECTRONIC ARTS  Halliburton

Poor diversification

The 3 months correlation between ELECTRONIC and Halliburton is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Halliburton go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and Halliburton

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to under-perform the Halliburton. But the stock apears to be less risky and, when comparing its historical volatility, ELECTRONIC ARTS is 1.57 times less risky than Halliburton. The stock trades about -0.54 of its potential returns per unit of risk. The Halliburton is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,739  in Halliburton on October 11, 2024 and sell it today you would lose (63.00) from holding Halliburton or give up 2.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

ELECTRONIC ARTS  vs.  Halliburton

ELECTRONIC ARTS

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ELECTRONIC ARTS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Halliburton is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ELECTRONIC ARTS and Halliburton

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

The idea behind ELECTRONIC ARTS and Halliburton 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.