Correlation Between SPORT LISBOA and ELECTRONIC ARTS

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

By analyzing existing cross correlation between SPORT LISBOA E and ELECTRONIC ARTS, you can compare the effects of market volatilities on SPORT LISBOA 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 SPORT LISBOA with a short position of ELECTRONIC ARTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORT LISBOA and ELECTRONIC ARTS.

Diversification Opportunities for SPORT LISBOA and ELECTRONIC ARTS

-0.17

Correlation Coefficient

SPORT LISBOA  ELECTRONIC ARTS

Good diversification

The 3 months correlation between SPORT and ELECTRONIC is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and SPORT LISBOA 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 SPORT LISBOA E 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 SPORT LISBOA i.e., SPORT LISBOA and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between SPORT LISBOA and ELECTRONIC ARTS

Assuming the 90 days horizon SPORT LISBOA E is expected to under-perform the ELECTRONIC ARTS. In addition to that, SPORT LISBOA is 1.38 times more volatile than ELECTRONIC ARTS. It trades about 0.0 of its total potential returns per unit of risk. ELECTRONIC ARTS is currently generating about 0.13 per unit of volatility. If you would invest  12,830  in ELECTRONIC ARTS on September 27, 2024 and sell it today you would earn a total of  1,368  from holding ELECTRONIC ARTS or generate 10.66% return on investment over 90 days.

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

SPORT LISBOA E  vs.  ELECTRONIC ARTS

SPORT LISBOA E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORT LISBOA E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPORT LISBOA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ELECTRONIC ARTS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 10 (%) 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 January 2025.

Pair Trading with SPORT LISBOA and ELECTRONIC ARTS

The main advantage of trading using opposite SPORT LISBOA and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPORT LISBOA 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's long position.

The idea behind SPORT LISBOA E 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.