Correlation Between Electronic Arts and GameStop Corp
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and GameStop Corp 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 GameStop Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and GameStop Corp, you can compare the effects of market volatilities on Electronic Arts and GameStop Corp 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 GameStop Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and GameStop Corp.
Diversification Opportunities for Electronic Arts and GameStop Corp
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Electronic and GameStop is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Electronic Arts i.e., Electronic Arts and GameStop Corp go up and down completely randomly.
Pair Corralation between Electronic Arts and GameStop Corp
Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 1.47 times less return on investment than GameStop Corp. But when comparing it to its historical volatility, Electronic Arts is 3.01 times less risky than GameStop Corp. It trades about 0.65 of its potential returns per unit of risk. GameStop Corp is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 2,273 in GameStop Corp on August 27, 2024 and sell it today you would earn a total of 517.00 from holding GameStop Corp or generate 22.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. GameStop Corp
Performance |
| Timeline |
| Electronic Arts |
| GameStop Corp |
Electronic Arts and GameStop Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and GameStop Corp
The main advantage of trading using opposite Electronic Arts and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, GameStop Corp 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 GameStop Corp will offset losses from the drop in GameStop Corp's long position.| Electronic Arts vs. Playstudios | Electronic Arts vs. Talkspace | Electronic Arts vs. Katapult Holdings Equity | Electronic Arts vs. Aquagold International |
| GameStop Corp vs. RH | GameStop Corp vs. Dicks Sporting Goods | GameStop Corp vs. Best Buy Co | GameStop Corp vs. AutoZone |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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