Correlation Between Orix Corp and Electronic Arts

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

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

Diversification Opportunities for Orix Corp and Electronic Arts

0.61

Correlation Coefficient

Orix Corp  Electronic Arts

Poor diversification

The 3 months correlation between Orix and Electronic is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Orix Corp 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 Orix Corp Ads 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 Orix Corp i.e., Orix Corp and Electronic Arts go up and down completely randomly.

Pair Corralation between Orix Corp and Electronic Arts

Assuming the 90 days trading horizon Orix Corp Ads is expected to generate 0.48 times more return on investment than Electronic Arts. However, Orix Corp Ads is 2.1 times less risky than Electronic Arts. It trades about -0.09 of its potential returns per unit of risk. Electronic Arts is currently generating about -0.1 per unit of risk. If you would invest  10,400  in Orix Corp Ads on November 29, 2024 and sell it today you would lose (800.00) from holding Orix Corp Ads or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Orix Corp Ads  vs.  Electronic Arts

Orix Corp Ads

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orix Corp Ads has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Orix Corp and Electronic Arts

The main advantage of trading using opposite Orix Corp and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orix Corp 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 Orix Corp Ads 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.