Correlation Between Electronic Arts and Melco Resorts
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Melco Resorts 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 Melco Resorts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Melco Resorts Entertainment, you can compare the effects of market volatilities on Electronic Arts and Melco Resorts 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 Melco Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Melco Resorts.
Diversification Opportunities for Electronic Arts and Melco Resorts
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Electronic and Melco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Melco Resorts Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melco Resorts Entert 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 Melco Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melco Resorts Entert has no effect on the direction of Electronic Arts i.e., Electronic Arts and Melco Resorts go up and down completely randomly.
Pair Corralation between Electronic Arts and Melco Resorts
Assuming the 90 days trading horizon Electronic Arts is expected to under-perform the Melco Resorts. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 2.06 times less risky than Melco Resorts. The stock trades about -0.06 of its potential returns per unit of risk. The Melco Resorts Entertainment is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,612 in Melco Resorts Entertainment on October 26, 2024 and sell it today you would earn a total of 72.00 from holding Melco Resorts Entertainment or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Melco Resorts Entertainment
Performance |
| Timeline |
| Electronic Arts |
| Melco Resorts Entert |
Electronic Arts and Melco Resorts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Melco Resorts
The main advantage of trading using opposite Electronic Arts and Melco Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Melco Resorts 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 Melco Resorts will offset losses from the drop in Melco Resorts' long position.| Electronic Arts vs. Verizon Communications | Electronic Arts vs. United Natural Foods, | Electronic Arts vs. CRISPR Therapeutics AG | Electronic Arts vs. Capital One Financial |
| Melco Resorts vs. Burlington Stores, | Melco Resorts vs. GP Investments | Melco Resorts vs. United Rentals | Melco Resorts vs. Electronic Arts |
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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