Correlation Between CD Projekt and Nintendo

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

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

Diversification Opportunities for CD Projekt and Nintendo

0.28

Correlation Coefficient

CD Projekt  Nintendo

Modest diversification

The 3 months correlation between OTGLY and Nintendo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA 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 CD Projekt 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 CD Projekt SA 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 CD Projekt i.e., CD Projekt and Nintendo go up and down completely randomly.

Pair Corralation between CD Projekt and Nintendo

Assuming the 90 days horizon CD Projekt SA is expected to under-perform the Nintendo. In addition to that, CD Projekt is 1.39 times more volatile than Nintendo Co ADR. It trades about -0.06 of its total potential returns per unit of risk. Nintendo Co ADR is currently generating about 0.11 per unit of volatility. If you would invest  1,330  in Nintendo Co ADR on September 3, 2024 and sell it today you would earn a total of  135.00  from holding Nintendo Co ADR or generate 10.15% return on investment over 90 days.

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

CD Projekt SA  vs.  Nintendo Co ADR

CD Projekt SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CD Projekt SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nintendo Co ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nintendo Co ADR are ranked lower than 8 (%) 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.

Pair Trading with CD Projekt and Nintendo

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

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.