Correlation Between Fras Le and Electronic Arts

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

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

Diversification Opportunities for Fras Le and Electronic Arts

-0.03

Correlation Coefficient

Fras Le  Electronic Arts

Good diversification

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

Pair Corralation between Fras Le and Electronic Arts

Assuming the 90 days trading horizon Fras Le is expected to generate 17.52 times less return on investment than Electronic Arts. In addition to that, Fras Le is 1.12 times more volatile than Electronic Arts. It trades about 0.01 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.23 per unit of volatility. If you would invest  41,457  in Electronic Arts on September 4, 2024 and sell it today you would earn a total of  7,495  from holding Electronic Arts or generate 18.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Fras le SA  vs.  Electronic Arts

Fras le SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fras le SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fras Le is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Fras Le and Electronic Arts

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

The idea behind Fras le SA and Electronic Arts 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 Global Correlations module to find global opportunities by holding instruments from different markets.