Correlation Between Nintendo and CD Projekt

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

By analyzing existing cross correlation between Nintendo Co ADR and CD Projekt SA, you can compare the effects of market volatilities on Nintendo and CD Projekt 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 CD Projekt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nintendo and CD Projekt.

Diversification Opportunities for Nintendo and CD Projekt

0.28

Correlation Coefficient

Nintendo  CD Projekt

Modest diversification

The 3 months correlation between Nintendo and OTGLY is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co ADR and CD Projekt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD Projekt SA 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 ADR are associated (or correlated) with CD Projekt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD Projekt SA has no effect on the direction of Nintendo i.e., Nintendo and CD Projekt go up and down completely randomly.

Pair Corralation between Nintendo and CD Projekt

Assuming the 90 days horizon Nintendo Co ADR is expected to generate 0.72 times more return on investment than CD Projekt. However, Nintendo Co ADR is 1.39 times less risky than CD Projekt. It trades about 0.11 of its potential returns per unit of risk. CD Projekt SA is currently generating about -0.06 per unit of risk. If you would invest  1,330  in Nintendo Co ADR on September 3, 2024 and sell it today you would earn a total of  135.00  from holding Nintendo Co ADR or generate 10.15% return on investment over 90 days.

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

Nintendo Co ADR  vs.  CD Projekt SA

Nintendo Co ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nintendo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CD Projekt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CD Projekt SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nintendo and CD Projekt

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

The idea behind Nintendo Co ADR and CD Projekt SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.