Correlation Between Nintendo and Take Two

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

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

Diversification Opportunities for Nintendo and Take Two

0.47

Correlation Coefficient

Nintendo  Take Two

Very weak diversification

The 3 months correlation between Nintendo and Take is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive 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 Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of Nintendo i.e., Nintendo and Take Two go up and down completely randomly.

Pair Corralation between Nintendo and Take Two

Assuming the 90 days horizon Nintendo Co is expected to under-perform the Take Two. In addition to that, Nintendo is 1.08 times more volatile than Take Two Interactive Software. It trades about -0.3 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about -0.15 per unit of volatility. If you would invest  15,000  in Take Two Interactive Software on January 31, 2024 and sell it today you would lose (573.00) from holding Take Two Interactive Software or give up 3.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Nintendo Co  vs.  Take Two Interactive Software

Nintendo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nintendo Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Take Two Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Take Two Interactive Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nintendo and Take Two

The main advantage of trading using opposite Nintendo and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nintendo position performs unexpectedly, Take Two 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 Take Two will offset losses from the drop in Take Two's long position.

The idea behind Nintendo Co and Take Two Interactive Software 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.