Correlation Between G2D Investments and Electronic Arts

Can any of the company-specific risk be diversified away by investing in both G2D Investments 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 G2D Investments and Electronic Arts into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G2D Investments and Electronic Arts, you can compare the effects of market volatilities on G2D Investments 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 G2D Investments with a short position of Electronic Arts. Check out your portfolio center. Please also check ongoing floating volatility patterns of G2D Investments and Electronic Arts.

Diversification Opportunities for G2D Investments and Electronic Arts

-0.4

Correlation Coefficient

G2D Investments  Electronic Arts

Very good diversification

The 3 months correlation between G2D and Electronic is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding G2D Investments and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and G2D Investments 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 G2D Investments 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 G2D Investments i.e., G2D Investments and Electronic Arts go up and down completely randomly.

Pair Corralation between G2D Investments and Electronic Arts

Assuming the 90 days trading horizon G2D Investments is expected to generate 15.16 times less return on investment than Electronic Arts. In addition to that, G2D Investments is 2.57 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 0.22 per unit of volatility. If you would invest  41,457  in Electronic Arts on September 3, 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	Very Weak
Accuracy	98.41%
Values	Daily Returns

G2D Investments  vs.  Electronic Arts

G2D Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G2D Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, G2D Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 G2D Investments and Electronic Arts

The main advantage of trading using opposite G2D Investments and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G2D Investments 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 G2D Investments 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 Transaction History module to view history of all your transactions and understand their impact on performance.