Correlation Between Teladoc Health and Electronic Arts

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

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

Diversification Opportunities for Teladoc Health and Electronic Arts

0.87

Correlation Coefficient

Teladoc Health  Electronic Arts

Very poor diversification

The 3 months correlation between Teladoc and Electronic is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Teladoc Health and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and Teladoc Health 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 Teladoc Health 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 Teladoc Health i.e., Teladoc Health and Electronic Arts go up and down completely randomly.

Pair Corralation between Teladoc Health and Electronic Arts

Assuming the 90 days trading horizon Teladoc Health is expected to under-perform the Electronic Arts. In addition to that, Teladoc Health is 2.82 times more volatile than Electronic Arts. It trades about -0.16 of its total potential returns per unit of risk. Electronic Arts is currently generating about -0.2 per unit of volatility. If you would invest  48,559  in Electronic Arts on September 28, 2024 and sell it today you would lose (2,580) from holding Electronic Arts or give up 5.31% of portfolio value over 90 days.

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

Teladoc Health  vs.  Electronic Arts

Teladoc Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Teladoc Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Teladoc Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Electronic Arts

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Electronic Arts sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teladoc Health and Electronic Arts

The main advantage of trading using opposite Teladoc Health and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teladoc Health 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 Teladoc Health 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.