Correlation Between Square Enix and Leaf Mobile

Can any of the company-specific risk be diversified away by investing in both Square Enix 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 Square Enix and Leaf Mobile 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 Leaf Mobile, you can compare the effects of market volatilities on Square Enix 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 Square Enix with a short position of Leaf Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Square Enix and Leaf Mobile.

Diversification Opportunities for Square Enix and Leaf Mobile

0.03

Correlation Coefficient

Square Enix  Leaf Mobile

Significant diversification

The 3 months correlation between Square and Leaf is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Square Enix Holdings and Leaf Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leaf Mobile 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 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 Square Enix i.e., Square Enix and Leaf Mobile go up and down completely randomly.

Pair Corralation between Square Enix and Leaf Mobile

Assuming the 90 days horizon Square Enix Holdings is expected to generate 1.27 times more return on investment than Leaf Mobile. However, Square Enix is 1.27 times more volatile than Leaf Mobile. It trades about 0.06 of its potential returns per unit of risk. Leaf Mobile is currently generating about -0.15 per unit of risk. If you would invest  3,480  in Square Enix Holdings on September 2, 2024 and sell it today you would earn a total of  380.00  from holding Square Enix Holdings or generate 10.92% return on investment over 90 days.

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

Square Enix Holdings  vs.  Leaf Mobile

Square Enix Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Square Enix Holdings are ranked lower than 4 (%) 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.

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 weak 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 Square Enix and Leaf Mobile

The main advantage of trading using opposite Square Enix and Leaf Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Square Enix 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 Square Enix Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.