Correlation Between Electronic Arts and Focus Home

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Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Focus Home 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 Focus Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Focus Home Interactive, you can compare the effects of market volatilities on Electronic Arts and Focus Home 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 Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Focus Home.

Diversification Opportunities for Electronic Arts and Focus Home

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Electronic and Focus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive 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 Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of Electronic Arts i.e., Electronic Arts and Focus Home go up and down completely randomly.

Pair Corralation between Electronic Arts and Focus Home

Assuming the 90 days horizon Electronic Arts is expected to under-perform the Focus Home. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 3.29 times less risky than Focus Home. The stock trades about -0.38 of its potential returns per unit of risk. The Focus Home Interactive is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,686  in Focus Home Interactive on September 22, 2024 and sell it today you would earn a total of  188.00  from holding Focus Home Interactive or generate 11.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Electronic Arts  vs.  Focus Home Interactive

 Performance 
       Timeline  
Electronic Arts 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Electronic Arts reported solid returns over the last few months and may actually be approaching a breakup point.
Focus Home Interactive 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Focus Home Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Electronic Arts and Focus Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Electronic Arts and Focus Home

The main advantage of trading using opposite Electronic Arts and Focus Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Focus Home 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 Focus Home will offset losses from the drop in Focus Home's long position.
The idea behind Electronic Arts and Focus Home Interactive 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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