Correlation Between HomeToGo and Electronic Arts

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

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

Diversification Opportunities for HomeToGo and Electronic Arts

0.48

Correlation Coefficient

HomeToGo  Electronic Arts

Very weak diversification

The 3 months correlation between HomeToGo and Electronic is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and Electronic Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electronic Arts and HomeToGo 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 HomeToGo SE 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 HomeToGo i.e., HomeToGo and Electronic Arts go up and down completely randomly.

Pair Corralation between HomeToGo and Electronic Arts

Assuming the 90 days trading horizon HomeToGo is expected to generate 1.8 times less return on investment than Electronic Arts. In addition to that, HomeToGo is 2.38 times more volatile than Electronic Arts. It trades about 0.04 of its total potential returns per unit of risk. Electronic Arts is currently generating about 0.16 per unit of volatility. If you would invest  12,670  in Electronic Arts on September 12, 2024 and sell it today you would earn a total of  3,196  from holding Electronic Arts or generate 25.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

HomeToGo SE  vs.  Electronic Arts

HomeToGo SE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, HomeToGo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Electronic Arts

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Electronic Arts unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HomeToGo and Electronic Arts

The main advantage of trading using opposite HomeToGo and Electronic Arts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeToGo 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 HomeToGo SE 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.

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.