Correlation Between Electronic Arts and TAL Education
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and TAL Education 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 TAL Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and TAL Education Group, you can compare the effects of market volatilities on Electronic Arts and TAL Education 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 TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and TAL Education.
Diversification Opportunities for Electronic Arts and TAL Education
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Electronic and TAL is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Electronic Arts i.e., Electronic Arts and TAL Education go up and down completely randomly.
Pair Corralation between Electronic Arts and TAL Education
Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.36 times more return on investment than TAL Education. However, Electronic Arts is 2.77 times less risky than TAL Education. It trades about 0.12 of its potential returns per unit of risk. TAL Education Group is currently generating about 0.01 per unit of risk. If you would invest 32,758 in Electronic Arts on October 12, 2024 and sell it today you would earn a total of 10,800 from holding Electronic Arts or generate 32.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Electronic Arts vs. TAL Education Group
Performance |
| Timeline |
| Electronic Arts |
| TAL Education Group |
Electronic Arts and TAL Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and TAL Education
The main advantage of trading using opposite Electronic Arts and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, TAL Education 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 TAL Education will offset losses from the drop in TAL Education's long position.| Electronic Arts vs. UnitedHealth Group Incorporated | Electronic Arts vs. Broadcom | Electronic Arts vs. Metalrgica Riosulense SA | Electronic Arts vs. Delta Air Lines |
| TAL Education vs. Akamai Technologies, | TAL Education vs. Electronic Arts | TAL Education vs. Take Two Interactive Software | TAL Education vs. ON Semiconductor |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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