Correlation Between Electronic Arts and Sea
Can any of the company-specific risk be diversified away by investing in both Electronic Arts and Sea 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 Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Sea Limited, you can compare the effects of market volatilities on Electronic Arts and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Sea.
Diversification Opportunities for Electronic Arts and Sea
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Electronic and Sea is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of Electronic Arts i.e., Electronic Arts and Sea go up and down completely randomly.
Pair Corralation between Electronic Arts and Sea
Assuming the 90 days horizon Electronic Arts is expected to under-perform the Sea. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 1.23 times less risky than Sea. The stock trades about -0.35 of its potential returns per unit of risk. The Sea Limited is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 10,820 in Sea Limited on September 27, 2024 and sell it today you would lose (360.00) from holding Sea Limited or give up 3.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Sea Limited
Performance |
| Timeline |
| Electronic Arts |
| Sea Limited |
Electronic Arts and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Sea
The main advantage of trading using opposite Electronic Arts and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| Electronic Arts vs. Nintendo Co | Electronic Arts vs. Sea Limited | Electronic Arts vs. NEXON Co | Electronic Arts vs. Bilibili |
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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