Correlation Between ELECTRONIC ARTS and Telecom Argentina

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

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

Diversification Opportunities for ELECTRONIC ARTS and Telecom Argentina

0.82

Correlation Coefficient

ELECTRONIC ARTS  Telecom Argentina

Very poor diversification

The 3 months correlation between ELECTRONIC and Telecom is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Telecom Argentina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina 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 Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Telecom Argentina go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and Telecom Argentina

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to under-perform the Telecom Argentina. But the stock apears to be less risky and, when comparing its historical volatility, ELECTRONIC ARTS is 3.14 times less risky than Telecom Argentina. The stock trades about -0.56 of its potential returns per unit of risk. The Telecom Argentina SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,320  in Telecom Argentina SA on October 11, 2024 and sell it today you would earn a total of  70.00  from holding Telecom Argentina SA or generate 5.3% return on investment over 90 days.

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

ELECTRONIC ARTS  vs.  Telecom Argentina SA

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 fragile basic indicators, ELECTRONIC ARTS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Telecom Argentina

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Telecom Argentina reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ELECTRONIC ARTS and Telecom Argentina

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

The idea behind ELECTRONIC ARTS and Telecom Argentina SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.