Correlation Between Electronic Arts and GungHo Online

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

By analyzing existing cross correlation between Electronic Arts and GungHo Online Entertainment, you can compare the effects of market volatilities on Electronic Arts and GungHo Online 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 GungHo Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and GungHo Online.

Diversification Opportunities for Electronic Arts and GungHo Online

-0.19

Correlation Coefficient

Electronic Arts  GungHo Online

Good diversification

The 3 months correlation between Electronic and GungHo is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert 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 GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of Electronic Arts i.e., Electronic Arts and GungHo Online go up and down completely randomly.

Pair Corralation between Electronic Arts and GungHo Online

Assuming the 90 days horizon Electronic Arts is expected to under-perform the GungHo Online. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 1.54 times less risky than GungHo Online. The stock trades about -0.38 of its potential returns per unit of risk. The GungHo Online Entertainment is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,810  in GungHo Online Entertainment on September 22, 2024 and sell it today you would earn a total of  210.00  from holding GungHo Online Entertainment or generate 11.6% 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.  GungHo Online Entertainment

Electronic Arts

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Electronic Arts reported solid returns over the last few months and may actually be approaching a breakup point.

GungHo Online Entert

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GungHo Online Entertainment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GungHo Online may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Electronic Arts and GungHo Online

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

The idea behind Electronic Arts and GungHo Online Entertainment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.