Correlation Between Capcom Co and Konami Holdings

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

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

Diversification Opportunities for Capcom Co and Konami Holdings

0.84

Correlation Coefficient

Capcom Co  Konami Holdings

Very poor diversification

The 3 months correlation between Capcom and Konami is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Capcom Co Ltd and Konami Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Konami 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 Ltd are associated (or correlated) with Konami Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Konami Holdings has no effect on the direction of Capcom Co i.e., Capcom Co and Konami Holdings go up and down completely randomly.

Pair Corralation between Capcom Co and Konami Holdings

Assuming the 90 days horizon Capcom Co is expected to generate 1.43 times less return on investment than Konami Holdings. But when comparing it to its historical volatility, Capcom Co Ltd is 1.44 times less risky than Konami Holdings. It trades about 0.12 of its potential returns per unit of risk. Konami Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,742  in Konami Holdings on December 29, 2024 and sell it today you would earn a total of  1,181  from holding Konami Holdings or generate 24.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Capcom Co Ltd  vs.  Konami Holdings

Capcom Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capcom Co Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Capcom Co showed solid returns over the last few months and may actually be approaching a breakup point.

Konami Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Konami Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Konami Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capcom Co and Konami Holdings

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

The idea behind Capcom Co Ltd and Konami 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.