Correlation Between Nintendo and Bilibili

Can any of the company-specific risk be diversified away by investing in both Nintendo and Bilibili 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 Bilibili 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 Bilibili, you can compare the effects of market volatilities on Nintendo and Bilibili 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 Bilibili. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nintendo and Bilibili.

Diversification Opportunities for Nintendo and Bilibili

-0.19

Correlation Coefficient

Nintendo  Bilibili

Good diversification

The 3 months correlation between Nintendo and Bilibili is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nintendo Co ADR and Bilibili in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bilibili 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 Bilibili. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bilibili has no effect on the direction of Nintendo i.e., Nintendo and Bilibili go up and down completely randomly.

Pair Corralation between Nintendo and Bilibili

Assuming the 90 days horizon Nintendo is expected to generate 3.45 times less return on investment than Bilibili. But when comparing it to its historical volatility, Nintendo Co ADR is 3.62 times less risky than Bilibili. It trades about 0.1 of its potential returns per unit of risk. Bilibili is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,503  in Bilibili on September 4, 2024 and sell it today you would earn a total of  420.00  from holding Bilibili or generate 27.94% return on investment over 90 days.

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

Nintendo Co ADR  vs.  Bilibili

Nintendo Co ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nintendo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bilibili

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bilibili are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Bilibili demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nintendo and Bilibili

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

The idea behind Nintendo Co ADR and Bilibili 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.