Correlation Between Electronic Arts and Nintendo
Can any of the company-specific risk be diversified away by investing in both Electronic Arts 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 Electronic Arts and Nintendo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electronic Arts and Nintendo Co ADR, you can compare the effects of market volatilities on Electronic Arts 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 Electronic Arts with a short position of Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electronic Arts and Nintendo.
Diversification Opportunities for Electronic Arts and Nintendo
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Electronic and Nintendo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Electronic Arts 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 Electronic Arts 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 Electronic Arts 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 Electronic Arts i.e., Electronic Arts and Nintendo go up and down completely randomly.
Pair Corralation between Electronic Arts and Nintendo
Allowing for the 90-day total investment horizon Electronic Arts is expected to under-perform the Nintendo. But the stock apears to be less risky and, when comparing its historical volatility, Electronic Arts is 2.66 times less risky than Nintendo. The stock trades about -0.28 of its potential returns per unit of risk. The Nintendo Co ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,505 in Nintendo Co ADR on October 20, 2024 and sell it today you would lose (24.00) from holding Nintendo Co ADR or give up 1.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electronic Arts vs. Nintendo Co ADR
Performance |
| Timeline |
| Electronic Arts |
| Nintendo Co ADR |
Electronic Arts and Nintendo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electronic Arts and Nintendo
The main advantage of trading using opposite Electronic Arts and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electronic Arts 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.| Electronic Arts vs. Nintendo Co ADR | Electronic Arts vs. Roblox Corp | Electronic Arts vs. NetEase | Electronic Arts vs. Take Two Interactive Software |
| Nintendo vs. Square Enix Holdings | Nintendo vs. Capcom Co Ltd | Nintendo vs. Electronic Arts | Nintendo vs. Roblox Corp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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