Correlation Between Square Enix and Gravity

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

Diversification Opportunities for Square Enix and Gravity

-0.2

Correlation Coefficient

Square Enix  Gravity

Good diversification

The 3 months correlation between Square and Gravity is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Square Enix Holdings and Gravity Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gravity 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 Gravity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gravity has no effect on the direction of Square Enix i.e., Square Enix and Gravity go up and down completely randomly.

Pair Corralation between Square Enix and Gravity

Assuming the 90 days horizon Square Enix Holdings is expected to generate 1.45 times more return on investment than Gravity. However, Square Enix is 1.45 times more volatile than Gravity Co. It trades about 0.08 of its potential returns per unit of risk. Gravity Co is currently generating about -0.06 per unit of risk. If you would invest  2,872  in Square Enix Holdings on September 12, 2024 and sell it today you would earn a total of  866.00  from holding Square Enix Holdings or generate 30.15% return on investment over 90 days.

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

Square Enix Holdings  vs.  Gravity Co

Square Enix Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Square Enix Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Square Enix is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gravity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gravity Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Gravity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Square Enix and Gravity

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

The idea behind Square Enix Holdings and Gravity Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.