Correlation Between ELECTRONIC ARTS and STRAYER EDUCATION

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

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

Diversification Opportunities for ELECTRONIC ARTS and STRAYER EDUCATION

0.84

Correlation Coefficient

ELECTRONIC ARTS  STRAYER EDUCATION

Very poor diversification

The 3 months correlation between ELECTRONIC and STRAYER is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and STRAYER EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAYER EDUCATION 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 STRAYER EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAYER EDUCATION has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and STRAYER EDUCATION go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and STRAYER EDUCATION

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to under-perform the STRAYER EDUCATION. But the stock apears to be less risky and, when comparing its historical volatility, ELECTRONIC ARTS is 1.85 times less risky than STRAYER EDUCATION. The stock trades about -0.48 of its potential returns per unit of risk. The STRAYER EDUCATION is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  9,350  in STRAYER EDUCATION on October 17, 2024 and sell it today you would lose (250.00) from holding STRAYER EDUCATION or give up 2.67% of portfolio value over 90 days.

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

ELECTRONIC ARTS  vs.  STRAYER EDUCATION

ELECTRONIC ARTS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

STRAYER EDUCATION

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STRAYER EDUCATION are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, STRAYER EDUCATION exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ELECTRONIC ARTS and STRAYER EDUCATION

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

The idea behind ELECTRONIC ARTS and STRAYER EDUCATION 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.