Correlation Between Electronic Arts and GoPro

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

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

Diversification Opportunities for Electronic Arts and GoPro

0.17

Correlation Coefficient

Electronic Arts  GoPro

Average diversification

The 3 months correlation between Electronic and GoPro is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc 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 GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Electronic Arts i.e., Electronic Arts and GoPro go up and down completely randomly.

Pair Corralation between Electronic Arts and GoPro

Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.3 times more return on investment than GoPro. However, Electronic Arts is 3.35 times less risky than GoPro. It trades about 0.22 of its potential returns per unit of risk. GoPro Inc is currently generating about 0.01 per unit of risk. If you would invest  39,005  in Electronic Arts on September 28, 2024 and sell it today you would earn a total of  6,974  from holding Electronic Arts or generate 17.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Electronic Arts  vs.  GoPro Inc

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.

GoPro Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoPro Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GoPro is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Electronic Arts and GoPro

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

The idea behind Electronic Arts and GoPro Inc 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.