Correlation Between Square Enix and Sega Sammy

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

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

Diversification Opportunities for Square Enix and Sega Sammy

0.54

Correlation Coefficient

Square Enix  Sega Sammy

Very weak diversification

The 3 months correlation between Square and Sega is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Square Enix Holdings and Sega Sammy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sega Sammy Holdings and Square Enix 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 Square Enix Holdings are associated (or correlated) with Sega Sammy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sega Sammy Holdings has no effect on the direction of Square Enix i.e., Square Enix and Sega Sammy go up and down completely randomly.

Pair Corralation between Square Enix and Sega Sammy

Assuming the 90 days horizon Square Enix Holdings is expected to generate 1.15 times more return on investment than Sega Sammy. However, Square Enix is 1.15 times more volatile than Sega Sammy Holdings. It trades about 0.12 of its potential returns per unit of risk. Sega Sammy Holdings is currently generating about 0.0 per unit of risk. If you would invest  1,818  in Square Enix Holdings on December 29, 2024 and sell it today you would earn a total of  327.00  from holding Square Enix Holdings or generate 17.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Square Enix Holdings  vs.  Sega Sammy Holdings

Square Enix Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Square Enix Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Square Enix showed solid returns over the last few months and may actually be approaching a breakup point.

Sega Sammy Holdings

Risk-Adjusted Performance

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.

Pair Trading with Square Enix and Sega Sammy

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

The idea behind Square Enix Holdings and Sega Sammy Holdings 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.