Correlation Between Sea and Nintendo
Can any of the company-specific risk be diversified away by investing in both Sea 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 Sea and Nintendo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Nintendo Co ADR, you can compare the effects of market volatilities on Sea 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 Sea with a short position of Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Nintendo.
Diversification Opportunities for Sea and Nintendo
Very good diversification
The 3 months correlation between Sea and Nintendo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sea 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 Sea 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 Sea 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 Sea i.e., Sea and Nintendo go up and down completely randomly.
Pair Corralation between Sea and Nintendo
Allowing for the 90-day total investment horizon Sea is expected to generate 2.96 times more return on investment than Nintendo. However, Sea is 2.96 times more volatile than Nintendo Co ADR. It trades about 0.23 of its potential returns per unit of risk. Nintendo Co ADR is currently generating about -0.53 per unit of risk. If you would invest 5,465 in Sea on January 25, 2024 and sell it today you would earn a total of 862.00 from holding Sea or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sea vs. Nintendo Co ADR
Performance |
| Timeline |
| Sea |
| Nintendo Co ADR |
Sea and Nintendo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Nintendo
The main advantage of trading using opposite Sea and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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.| Nintendo vs. Bank Mandiri Persero | Nintendo vs. Bank Mandiri Persero | Nintendo vs. PT Bank Rakyat | Nintendo vs. Bank Rakyat |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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