Correlation Between Electronic Arts and Charter Communications

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

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

Diversification Opportunities for Electronic Arts and Charter Communications

0.62

Correlation Coefficient

Electronic Arts  Charter Communications

Poor diversification

The 3 months correlation between Electronic and Charter is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of Electronic Arts i.e., Electronic Arts and Charter Communications go up and down completely randomly.

Pair Corralation between Electronic Arts and Charter Communications

Assuming the 90 days trading horizon Electronic Arts is expected to generate 0.7 times more return on investment than Charter Communications. However, Electronic Arts is 1.43 times less risky than Charter Communications. It trades about 0.03 of its potential returns per unit of risk. Charter Communications is currently generating about 0.01 per unit of risk. If you would invest  11,756  in Electronic Arts on March 31, 2025 and sell it today you would earn a total of  1,720  from holding Electronic Arts or generate 14.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.07%
Values	Daily Returns

Electronic Arts  vs.  Charter Communications

Electronic Arts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Electronic Arts is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Charter Communications

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Charter Communications is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Electronic Arts and Charter Communications

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

The idea behind Electronic Arts and Charter Communications 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.