Correlation Between Take Two and Nintendo

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

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

Diversification Opportunities for Take Two and Nintendo

0.88

Correlation Coefficient

Take Two  Nintendo

Very poor diversification

The 3 months correlation between Take and Nintendo is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software 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 Take Two 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 Take Two Interactive Software 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 Take Two i.e., Take Two and Nintendo go up and down completely randomly.

Pair Corralation between Take Two and Nintendo

Given the investment horizon of 90 days Take Two is expected to generate 1.34 times less return on investment than Nintendo. In addition to that, Take Two is 1.0 times more volatile than Nintendo Co ADR. It trades about 0.12 of its total potential returns per unit of risk. Nintendo Co ADR is currently generating about 0.15 per unit of volatility. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Take Two Interactive Software  vs.  Nintendo Co ADR

Take Two Interactive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Take Two displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Take Two and Nintendo

The main advantage of trading using opposite Take Two and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two 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 Take Two Interactive Software 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.