Correlation Between Electronic Arts and Reservoir Media

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

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

Diversification Opportunities for Electronic Arts and Reservoir Media

0.2

Correlation Coefficient

Electronic Arts  Reservoir Media

Modest diversification

The 3 months correlation between Electronic and Reservoir is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Electronic Arts i.e., Electronic Arts and Reservoir Media go up and down completely randomly.

Pair Corralation between Electronic Arts and Reservoir Media

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 1.08 times less return on investment than Reservoir Media. But when comparing it to its historical volatility, Electronic Arts is 1.53 times less risky than Reservoir Media. It trades about 0.05 of its potential returns per unit of risk. Reservoir Media is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  731.00  in Reservoir Media on May 7, 2025 and sell it today you would earn a total of  22.00  from holding Reservoir Media or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Electronic Arts  vs.  Reservoir Media

Electronic Arts

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Electronic Arts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Electronic Arts is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Reservoir Media

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Reservoir Media is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Electronic Arts and Reservoir Media

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

The idea behind Electronic Arts and Reservoir Media 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.