Correlation Between Electronic Arts and Imax Corp

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

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

Diversification Opportunities for Electronic Arts and Imax Corp

0.93

Correlation Coefficient

Electronic Arts  Imax Corp

Almost no diversification

The 3 months correlation between Electronic and Imax is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Imax Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Imax Corp and Electronic Arts 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 Electronic Arts are associated (or correlated) with Imax Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Imax Corp has no effect on the direction of Electronic Arts i.e., Electronic Arts and Imax Corp go up and down completely randomly.

Pair Corralation between Electronic Arts and Imax Corp

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 1.52 times less return on investment than Imax Corp. But when comparing it to its historical volatility, Electronic Arts is 1.85 times less risky than Imax Corp. It trades about 0.07 of its potential returns per unit of risk. Imax Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,854  in Imax Corp on August 31, 2024 and sell it today you would earn a total of  778.00  from holding Imax Corp or generate 41.96% return on investment over 90 days.

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

Electronic Arts  vs.  Imax Corp

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.

Imax Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Imax Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Imax Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and Imax Corp

The main advantage of trading using opposite Electronic Arts and Imax Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Imax Corp 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 Imax Corp will offset losses from the drop in Imax Corp's long position.

The idea behind Electronic Arts and Imax Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.