Correlation Between Gamma Communications and Electronic Arts

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

By analyzing existing cross correlation between Gamma Communications PLC and Electronic Arts, you can compare the effects of market volatilities on Gamma Communications and Electronic Arts 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 Gamma Communications with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and Electronic Arts.

Diversification Opportunities for Gamma Communications and Electronic Arts

0.47

Correlation Coefficient

Gamma Communications  Electronic Arts

Very weak diversification

The 3 months correlation between Gamma and Electronic is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications PLC and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Gamma Communications 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 Gamma Communications PLC are associated (or correlated) with Electronic Arts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electronic Arts has no effect on the direction of Gamma Communications i.e., Gamma Communications and Electronic Arts go up and down completely randomly.

Pair Corralation between Gamma Communications and Electronic Arts

Assuming the 90 days trading horizon Gamma Communications PLC is expected to generate 1.14 times more return on investment than Electronic Arts. However, Gamma Communications is 1.14 times more volatile than Electronic Arts. It trades about 0.03 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.03 per unit of risk. If you would invest  116,997  in Gamma Communications PLC on October 15, 2024 and sell it today you would earn a total of  25,803  from holding Gamma Communications PLC or generate 22.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

Gamma Communications PLC  vs.  Electronic Arts

Gamma Communications PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamma Communications PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Electronic Arts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Electronic Arts is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gamma Communications and Electronic Arts

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

The idea behind Gamma Communications PLC and Electronic Arts 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..