Correlation Between Electronic Arts and TripAdvisor

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

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

Diversification Opportunities for Electronic Arts and TripAdvisor

0.07

Correlation Coefficient

Electronic Arts  TripAdvisor

Significant diversification

The 3 months correlation between Electronic and TripAdvisor is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts and TripAdvisor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TripAdvisor 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 TripAdvisor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TripAdvisor has no effect on the direction of Electronic Arts i.e., Electronic Arts and TripAdvisor go up and down completely randomly.

Pair Corralation between Electronic Arts and TripAdvisor

Allowing for the 90-day total investment horizon Electronic Arts is expected to generate 12.23 times less return on investment than TripAdvisor. But when comparing it to its historical volatility, Electronic Arts is 2.53 times less risky than TripAdvisor. It trades about 0.02 of its potential returns per unit of risk. TripAdvisor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,273  in TripAdvisor on May 5, 2025 and sell it today you would earn a total of  348.00  from holding TripAdvisor or generate 27.34% return on investment over 90 days.

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

Electronic Arts  vs.  TripAdvisor

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. 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.

TripAdvisor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward indicators, TripAdvisor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Electronic Arts and TripAdvisor

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

The idea behind Electronic Arts and TripAdvisor 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.