Correlation Between ABB and Nintendo

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

By analyzing existing cross correlation between ABB and Nintendo Co ADR, you can compare the effects of market volatilities on ABB 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 ABB with a short position of Nintendo. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Nintendo.

Diversification Opportunities for ABB and Nintendo

0.3

Correlation Coefficient

ABB  Nintendo

Weak diversification

The 3 months correlation between ABB and Nintendo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ABB 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 ABB 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 ABB 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 ABB i.e., ABB and Nintendo go up and down completely randomly.

Pair Corralation between ABB and Nintendo

Assuming the 90 days horizon ABB is expected to generate 1.05 times more return on investment than Nintendo. However, ABB is 1.05 times more volatile than Nintendo Co ADR. It trades about 0.14 of its potential returns per unit of risk. Nintendo Co ADR is currently generating about -0.02 per unit of risk. If you would invest  5,565  in ABB on May 4, 2025 and sell it today you would earn a total of  1,102  from holding ABB or generate 19.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ABB  vs.  Nintendo Co ADR

ABB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ABB reported solid returns over the last few months and may actually be approaching a breakup point.

Nintendo Co ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nintendo Co ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nintendo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABB and Nintendo

The main advantage of trading using opposite ABB and Nintendo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB 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 ABB 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.