Correlation Between Nintendo and NEXON
Can any of the company-specific risk be diversified away by investing in both Nintendo and NEXON 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 Nintendo and NEXON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nintendo Co and NEXON Co, you can compare the effects of market volatilities on Nintendo and NEXON 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 Nintendo with a short position of NEXON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nintendo and NEXON.
Diversification Opportunities for Nintendo and NEXON
Excellent diversification
The 3 months correlation between Nintendo and NEXON is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co and NEXON Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXON and Nintendo 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 Nintendo Co are associated (or correlated) with NEXON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXON has no effect on the direction of Nintendo i.e., Nintendo and NEXON go up and down completely randomly.
Pair Corralation between Nintendo and NEXON
Assuming the 90 days trading horizon Nintendo Co is expected to generate 1.73 times more return on investment than NEXON. However, Nintendo is 1.73 times more volatile than NEXON Co. It trades about 0.16 of its potential returns per unit of risk. NEXON Co is currently generating about 0.25 per unit of risk. If you would invest 1,260 in Nintendo Co on September 27, 2024 and sell it today you would earn a total of 120.00 from holding Nintendo Co or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nintendo Co vs. NEXON Co
Performance |
| Timeline |
| Nintendo |
| NEXON |
Nintendo and NEXON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nintendo and NEXON
The main advantage of trading using opposite Nintendo and NEXON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nintendo position performs unexpectedly, NEXON 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 NEXON will offset losses from the drop in NEXON's long position.The idea behind Nintendo Co and NEXON 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.| NEXON vs. New Residential Investment | NEXON vs. REGAL ASIAN INVESTMENTS | NEXON vs. Virtus Investment Partners | NEXON vs. Gladstone 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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