Correlation Between Sega Sammy and Nintendo

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

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

Diversification Opportunities for Sega Sammy and Nintendo

0.45

Correlation Coefficient

Sega Sammy  Nintendo

Very weak diversification

The 3 months correlation between Sega and Nintendo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sega Sammy Holdings and Nintendo Co ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo Co ADR and Sega Sammy 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 Sega Sammy Holdings are associated (or correlated) with Nintendo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nintendo Co ADR has no effect on the direction of Sega Sammy i.e., Sega Sammy and Nintendo go up and down completely randomly.

Pair Corralation between Sega Sammy and Nintendo

Assuming the 90 days horizon Sega Sammy is expected to generate 242.07 times less return on investment than Nintendo. But when comparing it to its historical volatility, Sega Sammy Holdings is 1.12 times less risky than Nintendo. It trades about 0.0 of its potential returns per unit of risk. Nintendo Co ADR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,462  in Nintendo Co ADR on December 29, 2024 and sell it today you would earn a total of  332.00  from holding Nintendo Co ADR or generate 22.71% return on investment over 90 days.

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

Sega Sammy Holdings  vs.  Nintendo Co ADR

Sega Sammy Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sega Sammy Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Sega Sammy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nintendo Co ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nintendo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sega Sammy and Nintendo

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

The idea behind Sega Sammy Holdings and Nintendo Co ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.