Correlation Between IQIYI and Electronic Arts

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

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

Diversification Opportunities for IQIYI and Electronic Arts

-0.2

Correlation Coefficient

IQIYI  Electronic Arts

Good diversification

The 3 months correlation between IQIYI and Electronic is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and IQIYI 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 iQIYI Inc 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 IQIYI i.e., IQIYI and Electronic Arts go up and down completely randomly.

Pair Corralation between IQIYI and Electronic Arts

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 1.61 times more return on investment than Electronic Arts. However, IQIYI is 1.61 times more volatile than Electronic Arts. It trades about 0.08 of its potential returns per unit of risk. Electronic Arts is currently generating about 0.01 per unit of risk. If you would invest  202.00  in iQIYI Inc on December 29, 2024 and sell it today you would earn a total of  35.00  from holding iQIYI Inc or generate 17.33% return on investment over 90 days.

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

iQIYI Inc  vs.  Electronic Arts

iQIYI Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI reported solid returns over the last few months and may actually be approaching a breakup point.

Electronic Arts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Electronic Arts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Electronic Arts is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IQIYI and Electronic Arts

The main advantage of trading using opposite IQIYI and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IQIYI 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 iQIYI Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.