Correlation Between TuanChe ADR and Electronic Arts

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

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

Diversification Opportunities for TuanChe ADR and Electronic Arts

0.01

Correlation Coefficient

TuanChe ADR  Electronic Arts

Significant diversification

The 3 months correlation between TuanChe and Electronic is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding TuanChe ADR and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and TuanChe ADR 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 TuanChe ADR 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 TuanChe ADR i.e., TuanChe ADR and Electronic Arts go up and down completely randomly.

Pair Corralation between TuanChe ADR and Electronic Arts

Allowing for the 90-day total investment horizon TuanChe ADR is expected to under-perform the Electronic Arts. In addition to that, TuanChe ADR is 1.78 times more volatile than Electronic Arts. It trades about -0.13 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.01 per unit of volatility. If you would invest  14,633  in Electronic Arts on December 29, 2024 and sell it today you would lose (208.00) from holding Electronic Arts or give up 1.42% of portfolio value over 90 days.

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

TuanChe ADR  vs.  Electronic Arts

TuanChe ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days TuanChe ADR 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 fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 TuanChe ADR and Electronic Arts

The main advantage of trading using opposite TuanChe ADR and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TuanChe ADR 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 TuanChe ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .