Correlation Between Capcom Co and Square Enix

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

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

Diversification Opportunities for Capcom Co and Square Enix

-0.1

Correlation Coefficient

Capcom Co  Square Enix

Good diversification

The 3 months correlation between Capcom and Square is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Capcom Co 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 Capcom Co 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 Capcom Co 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 Capcom Co i.e., Capcom Co and Square Enix go up and down completely randomly.

Pair Corralation between Capcom Co and Square Enix

Assuming the 90 days horizon Capcom Co is expected to generate 0.83 times more return on investment than Square Enix. However, Capcom Co is 1.21 times less risky than Square Enix. It trades about 0.08 of its potential returns per unit of risk. Square Enix Holdings is currently generating about 0.06 per unit of risk. If you would invest  2,040  in Capcom Co on September 3, 2024 and sell it today you would earn a total of  246.00  from holding Capcom Co or generate 12.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Capcom Co  vs.  Square Enix Holdings

Capcom Co

Risk-Adjusted Performance

6 of 100

Modest

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

Square Enix Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Square Enix Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Square Enix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capcom Co and Square Enix

The main advantage of trading using opposite Capcom Co and Square Enix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capcom Co 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 Capcom Co 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.