Correlation Between Apple and Nintendo
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Nintendo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Nintendo Co, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Nintendo.
Diversification Opportunities for Apple and Nintendo
Very weak diversification
The 3 months correlation between Apple and Nintendo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Nintendo Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nintendo and Apple 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 Apple Inc 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 has no effect on the direction of Apple i.e., Apple and Nintendo go up and down completely randomly.
Pair Corralation between Apple and Nintendo
Given the investment horizon of 90 days Apple Inc is expected to under-perform the Nintendo. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.73 times less risky than Nintendo. The stock trades about -0.04 of its potential returns per unit of risk. The Nintendo Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,830 in Nintendo Co on November 4, 2024 and sell it today you would earn a total of 616.00 from holding Nintendo Co or generate 10.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.5% |
| Values | Daily Returns |
Apple Inc vs. Nintendo Co
Performance |
| Timeline |
| Apple Inc |
| Nintendo |
Apple and Nintendo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Nintendo
The main advantage of trading using opposite Apple and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc and Nintendo Co 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.| Nintendo vs. Granite Construction | Nintendo vs. ANGLO ASIAN MINING | Nintendo vs. FARM 51 GROUP | Nintendo vs. Sumitomo Mitsui Construction |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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