Correlation Between Nintendo and Roblox Corp

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

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

Diversification Opportunities for Nintendo and Roblox Corp

-0.03

Correlation Coefficient

Nintendo  Roblox Corp

Good diversification

The 3 months correlation between Nintendo and Roblox is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co and Roblox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roblox Corp and Nintendo 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 Nintendo Co are associated (or correlated) with Roblox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roblox Corp has no effect on the direction of Nintendo i.e., Nintendo and Roblox Corp go up and down completely randomly.

Pair Corralation between Nintendo and Roblox Corp

Assuming the 90 days horizon Nintendo Co is expected to generate 1.16 times more return on investment than Roblox Corp. However, Nintendo is 1.16 times more volatile than Roblox Corp. It trades about 0.11 of its potential returns per unit of risk. Roblox Corp is currently generating about 0.02 per unit of risk. If you would invest  5,976  in Nintendo Co on December 30, 2024 and sell it today you would earn a total of  1,224  from holding Nintendo Co or generate 20.48% return on investment over 90 days.

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

Nintendo Co  vs.  Roblox Corp

Nintendo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Roblox Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roblox Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Roblox Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nintendo and Roblox Corp

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

The idea behind Nintendo Co and Roblox Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.