Correlation Between Square Enix and Sega Sammy

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

By analyzing existing cross correlation between Square Enix Holdings and Sega Sammy Holdings, you can compare the effects of market volatilities on Square Enix and Sega Sammy 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 Square Enix with a short position of Sega Sammy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Square Enix and Sega Sammy.

Diversification Opportunities for Square Enix and Sega Sammy

0.91

Correlation Coefficient

Square Enix  Sega Sammy

Almost no diversification

The 3 months correlation between Square and Sega is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Square Enix Holdings and Sega Sammy Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sega Sammy Holdings and Square Enix 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 Square Enix Holdings are associated (or correlated) with Sega Sammy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sega Sammy Holdings has no effect on the direction of Square Enix i.e., Square Enix and Sega Sammy go up and down completely randomly.

Pair Corralation between Square Enix and Sega Sammy

Assuming the 90 days horizon Square Enix is expected to generate 2.59 times less return on investment than Sega Sammy. But when comparing it to its historical volatility, Square Enix Holdings is 2.83 times less risky than Sega Sammy. It trades about 0.06 of its potential returns per unit of risk. Sega Sammy Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Sega Sammy Holdings on July 15, 2024 and sell it today you would earn a total of  11.00  from holding Sega Sammy Holdings or generate 2.21% return on investment over 90 days.

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

Square Enix Holdings  vs.  Sega Sammy Holdings

Square Enix Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Square Enix Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Square Enix reported solid returns over the last few months and may actually be approaching a breakup point.

Sega Sammy Holdings

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Square Enix and Sega Sammy

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

The idea behind Square Enix Holdings and Sega Sammy Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.