Correlation Between Global Payments and ELECTRONIC ARTS

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

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

Diversification Opportunities for Global Payments and ELECTRONIC ARTS

0.93

Correlation Coefficient

Global Payments  ELECTRONIC ARTS

Almost no diversification

The 3 months correlation between Global and ELECTRONIC is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and ELECTRONIC ARTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECTRONIC ARTS and Global Payments 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 Global Payments 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 Global Payments i.e., Global Payments and ELECTRONIC ARTS go up and down completely randomly.

Pair Corralation between Global Payments and ELECTRONIC ARTS

Assuming the 90 days horizon Global Payments is expected to generate 0.88 times more return on investment than ELECTRONIC ARTS. However, Global Payments is 1.13 times less risky than ELECTRONIC ARTS. It trades about -0.14 of its potential returns per unit of risk. ELECTRONIC ARTS is currently generating about -0.41 per unit of risk. If you would invest  11,165  in Global Payments on September 25, 2024 and sell it today you would lose (390.00) from holding Global Payments or give up 3.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Global Payments  vs.  ELECTRONIC ARTS

Global Payments

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Payments are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Global Payments reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, ELECTRONIC ARTS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global Payments and ELECTRONIC ARTS

The main advantage of trading using opposite Global Payments and ELECTRONIC ARTS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Payments 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's long position.

The idea behind Global Payments 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.