Correlation Between Electronic Arts and International Consolidated

Can any of the company-specific risk be diversified away by investing in both Electronic Arts and International Consolidated 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 International Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Electronic Arts and International Consolidated Airlines, you can compare the effects of market volatilities on Electronic Arts and International Consolidated 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 International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and International Consolidated.

Diversification Opportunities for Electronic Arts and International Consolidated

0.6

Correlation Coefficient

Electronic Arts  International Consolidated

Poor diversification

The 3 months correlation between Electronic and International is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Electronic Arts i.e., Electronic Arts and International Consolidated go up and down completely randomly.

Pair Corralation between Electronic Arts and International Consolidated

Assuming the 90 days trading horizon Electronic Arts is expected to generate 3.37 times less return on investment than International Consolidated. But when comparing it to its historical volatility, Electronic Arts is 1.74 times less risky than International Consolidated. It trades about 0.1 of its potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  25,342  in International Consolidated Airlines on April 1, 2025 and sell it today you would earn a total of  8,588  from holding International Consolidated Airlines or generate 33.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Electronic Arts  vs.  International Consolidated Air

Electronic Arts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Electronic Arts may actually be approaching a critical reversion point that can send shares even higher in July 2025.

International Consolidated

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and International Consolidated

The main advantage of trading using opposite Electronic Arts and International Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts position performs unexpectedly, International Consolidated 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 International Consolidated will offset losses from the drop in International Consolidated's long position.

The idea behind Electronic Arts and International Consolidated Airlines pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.