Correlation Between ELECTRONIC ARTS and Uber Technologies

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

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

Diversification Opportunities for ELECTRONIC ARTS and Uber Technologies

-0.06

Correlation Coefficient

ELECTRONIC ARTS  Uber Technologies

Good diversification

The 3 months correlation between ELECTRONIC and Uber is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding ELECTRONIC ARTS and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of ELECTRONIC ARTS i.e., ELECTRONIC ARTS and Uber Technologies go up and down completely randomly.

Pair Corralation between ELECTRONIC ARTS and Uber Technologies

Assuming the 90 days trading horizon ELECTRONIC ARTS is expected to generate 0.5 times more return on investment than Uber Technologies. However, ELECTRONIC ARTS is 2.01 times less risky than Uber Technologies. It trades about 0.16 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.03 per unit of risk. If you would invest  13,569  in ELECTRONIC ARTS on September 3, 2024 and sell it today you would earn a total of  1,851  from holding ELECTRONIC ARTS or generate 13.64% 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.  Uber Technologies

ELECTRONIC ARTS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ELECTRONIC ARTS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ELECTRONIC ARTS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Uber Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Uber Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ELECTRONIC ARTS and Uber Technologies

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

The idea behind ELECTRONIC ARTS and Uber Technologies 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.