Correlation Between Electronic Arts and Booking Holdings
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Booking Holdings 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 Booking Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Booking Holdings, you can compare the effects of market volatilities on Electronic Arts and Booking Holdings 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 Booking Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Booking Holdings.
Diversification Opportunities for Electronic Arts and Booking Holdings
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Electronic and Booking is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Electronic Arts i.e., Electronic Arts and Booking Holdings go up and down completely randomly.
Pair Corralation between Electronic Arts and Booking Holdings
Assuming the 90 days trading horizon Electronic Arts is expected to generate 2.54 times less return on investment than Booking Holdings. But when comparing it to its historical volatility, Electronic Arts is 1.21 times less risky than Booking Holdings. It trades about 0.06 of its potential returns per unit of risk. Booking Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,015 in Booking Holdings on September 4, 2024 and sell it today you would earn a total of 12,140 from holding Booking Holdings or generate 201.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.4% |
| Values | Daily Returns |
Electronic Arts vs. Booking Holdings
Performance |
| Timeline |
| Electronic Arts |
| Booking Holdings |
Electronic Arts and Booking Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Booking Holdings
The main advantage of trading using opposite Electronic Arts and Booking Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Booking Holdings 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 Booking Holdings will offset losses from the drop in Booking Holdings' long position.| Electronic Arts vs. Take Two Interactive Software | Electronic Arts vs. Bilibili | Electronic Arts vs. Fundo Investimento Imobiliario | Electronic Arts vs. Fras le SA |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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