Correlation Between Nintendo and PLAYTIKA HOLDING

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

By analyzing existing cross correlation between Nintendo Co and PLAYTIKA HOLDING DL 01, you can compare the effects of market volatilities on Nintendo and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nintendo and PLAYTIKA HOLDING.

Diversification Opportunities for Nintendo and PLAYTIKA HOLDING

0.58

Correlation Coefficient

Nintendo  PLAYTIKA HOLDING

Very weak diversification

The 3 months correlation between Nintendo and PLAYTIKA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co and PLAYTIKA HOLDING DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTIKA HOLDING has no effect on the direction of Nintendo i.e., Nintendo and PLAYTIKA HOLDING go up and down completely randomly.

Pair Corralation between Nintendo and PLAYTIKA HOLDING

Assuming the 90 days trading horizon Nintendo is expected to generate 1.06 times less return on investment than PLAYTIKA HOLDING. In addition to that, Nintendo is 1.43 times more volatile than PLAYTIKA HOLDING DL 01. It trades about 0.1 of its total potential returns per unit of risk. PLAYTIKA HOLDING DL 01 is currently generating about 0.15 per unit of volatility. If you would invest  656.00  in PLAYTIKA HOLDING DL 01 on September 5, 2024 and sell it today you would earn a total of  139.00  from holding PLAYTIKA HOLDING DL 01 or generate 21.19% return on investment over 90 days.

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

Nintendo Co  vs.  PLAYTIKA HOLDING DL 01

Nintendo

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nintendo reported solid returns over the last few months and may actually be approaching a breakup point.

PLAYTIKA HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYTIKA HOLDING DL 01 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PLAYTIKA HOLDING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nintendo and PLAYTIKA HOLDING

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

The idea behind Nintendo Co and PLAYTIKA HOLDING DL 01 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.