Correlation Between Nintendo and Digital Bros

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

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

Diversification Opportunities for Nintendo and Digital Bros

0.59

Correlation Coefficient

Nintendo  Digital Bros

Very weak diversification

The 3 months correlation between Nintendo and Digital is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co and Digital Bros SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Bros SpA 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 Digital Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Bros SpA has no effect on the direction of Nintendo i.e., Nintendo and Digital Bros go up and down completely randomly.

Pair Corralation between Nintendo and Digital Bros

Assuming the 90 days horizon Nintendo Co is expected to generate 0.73 times more return on investment than Digital Bros. However, Nintendo Co is 1.38 times less risky than Digital Bros. It trades about 0.12 of its potential returns per unit of risk. Digital Bros SpA is currently generating about -0.01 per unit of risk. If you would invest  5,616  in Nintendo Co on December 23, 2024 and sell it today you would earn a total of  1,108  from holding Nintendo Co or generate 19.73% return on investment over 90 days.

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

Nintendo Co  vs.  Digital Bros SpA

Nintendo

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

Digital Bros SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Bros SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Digital Bros is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nintendo and Digital Bros

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

The idea behind Nintendo Co and Digital Bros SpA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.