Correlation Between Nintendo and Leaf Mobile

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

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

Diversification Opportunities for Nintendo and Leaf Mobile

-0.56

Correlation Coefficient

Nintendo  Leaf Mobile

Excellent diversification

The 3 months correlation between Nintendo and Leaf is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co ADR and Leaf Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaf Mobile 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 ADR are associated (or correlated) with Leaf Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leaf Mobile has no effect on the direction of Nintendo i.e., Nintendo and Leaf Mobile go up and down completely randomly.

Pair Corralation between Nintendo and Leaf Mobile

Assuming the 90 days horizon Nintendo Co ADR is expected to generate 0.46 times more return on investment than Leaf Mobile. However, Nintendo Co ADR is 2.15 times less risky than Leaf Mobile. It trades about 0.3 of its potential returns per unit of risk. Leaf Mobile is currently generating about -0.06 per unit of risk. If you would invest  1,326  in Nintendo Co ADR on September 22, 2024 and sell it today you would earn a total of  179.00  from holding Nintendo Co ADR or generate 13.5% return on investment over 90 days.

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

Nintendo Co ADR  vs.  Leaf Mobile

Nintendo Co ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nintendo showed solid returns over the last few months and may actually be approaching a breakup point.

Leaf Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leaf Mobile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nintendo and Leaf Mobile

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

The idea behind Nintendo Co ADR and Leaf Mobile 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.