Correlation Between Electronic Arts and Sunny Optical

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

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

Diversification Opportunities for Electronic Arts and Sunny Optical

0.68

Correlation Coefficient

Electronic Arts  Sunny Optical

Poor diversification

The 3 months correlation between Electronic and Sunny is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Electronic Arts i.e., Electronic Arts and Sunny Optical go up and down completely randomly.

Pair Corralation between Electronic Arts and Sunny Optical

Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.3 times more return on investment than Sunny Optical. However, Electronic Arts is 3.29 times less risky than Sunny Optical. It trades about 0.09 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.02 per unit of risk. If you would invest  12,890  in Electronic Arts on September 4, 2024 and sell it today you would earn a total of  3,004  from holding Electronic Arts or generate 23.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Electronic Arts  vs.  Sunny Optical Technology

Electronic Arts

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Electronic Arts unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sunny Optical Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and Sunny Optical

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

The idea behind Electronic Arts and Sunny Optical Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.