Correlation Between World Wireless and Electronic Arts

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

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

Diversification Opportunities for World Wireless and Electronic Arts

-0.58

Correlation Coefficient

World Wireless  Electronic Arts

Excellent diversification

The 3 months correlation between World and Electronic is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding World Wireless Communications and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and World Wireless 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 World Wireless Communications 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 World Wireless i.e., World Wireless and Electronic Arts go up and down completely randomly.

Pair Corralation between World Wireless and Electronic Arts

If you would invest  14,606  in Electronic Arts on September 1, 2024 and sell it today you would earn a total of  1,761  from holding Electronic Arts or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

World Wireless Communications  vs.  Electronic Arts

World Wireless Commu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Wireless Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, World Wireless is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Electronic Arts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Electronic Arts may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with World Wireless and Electronic Arts

The main advantage of trading using opposite World Wireless and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Wireless 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 World Wireless Communications 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.