Correlation Between Activision Blizzard and Square Enix

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

By analyzing existing cross correlation between Activision Blizzard and Square Enix Holdings, you can compare the effects of market volatilities on Activision Blizzard and Square Enix 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 Activision Blizzard with a short position of Square Enix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Activision Blizzard and Square Enix.

Diversification Opportunities for Activision Blizzard and Square Enix

0.0

Correlation Coefficient

Activision Blizzard  Square Enix

Pay attention - limited upside

The 3 months correlation between Activision and Square is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Activision Blizzard and Square Enix Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Enix Holdings and Activision Blizzard 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 Activision Blizzard are associated (or correlated) with Square Enix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Enix Holdings has no effect on the direction of Activision Blizzard i.e., Activision Blizzard and Square Enix go up and down completely randomly.

Pair Corralation between Activision Blizzard and Square Enix

If you would invest  4,080  in Square Enix Holdings on December 21, 2024 and sell it today you would earn a total of  520.00  from holding Square Enix Holdings or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Activision Blizzard  vs.  Square Enix Holdings

Activision Blizzard

Risk-Adjusted Performance

Very Weak

Over the last 90 days Activision Blizzard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Activision Blizzard is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Square Enix Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Square Enix Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Square Enix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Activision Blizzard and Square Enix

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

The idea behind Activision Blizzard and Square Enix Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.