Correlation Between ELECTRONIC ARTS and FORWARD AIR

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

By analyzing existing cross correlation between ELECTRONIC ARTS and FORWARD AIR P, you can compare the effects of market volatilities on ELECTRONIC ARTS and FORWARD AIR 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 FORWARD AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of ELECTRONIC ARTS and FORWARD AIR.

Diversification Opportunities for ELECTRONIC ARTS and FORWARD AIR

-0.03

Correlation Coefficient

ELECTRONIC ARTS  FORWARD AIR

Good diversification

The 3 months correlation between ELECTRONIC and FORWARD is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and FORWARD AIR go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and FORWARD AIR

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 3.5 times less return on investment than FORWARD AIR. But when comparing it to its historical volatility, ELECTRONIC ARTS is 4.43 times less risky than FORWARD AIR. It trades about 0.08 of its potential returns per unit of risk. FORWARD AIR P is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,040  in FORWARD AIR P on September 24, 2024 and sell it today you would earn a total of  900.00  from holding FORWARD AIR P or generate 44.12% return on investment over 90 days.

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

ELECTRONIC ARTS  vs.  FORWARD AIR P

ELECTRONIC ARTS

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ELECTRONIC ARTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORWARD AIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FORWARD AIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ELECTRONIC ARTS and FORWARD AIR

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

The idea behind ELECTRONIC ARTS and FORWARD AIR P 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 Stocks Directory module to find actively traded stocks across global markets.