#Japan #Tokyo #Nikkei #Stock Analysis #Asunaro

Why Individual Investors' Stocks Struggle to Align with the Nikkei Average

In a groundbreaking study conducted by Asunaro Investment Advisors, a consensus has emerged regarding a persistent issue faced by individual investors: the disconnect between the performance of their stock holdings and the rising Nikkei Average. As reported, many private investors have voiced their concerns about their investments failing to reflect the burgeoning market index, leading to perplexity among those trying to build their wealth amidst the market's upward trajectory.

The Core Findings of the Analysis

The analysis revealed a striking conclusion: over 95% of the fluctuations in small and mid-cap stocks are independent of the Nikkei Average's movements.
This finding underscores the idea that merely observing market trends is inadequate for investors in small and mid-cap stocks. Instead, they must shift their focus to the individual company's performance and growth potential when making investment decisions. This means that the success of these smaller stocks relies less on the overall market trends and more on company-specific developments.

Understanding Investor Concerns

As the Nikkei Average reached new peaks, individual investors expressed a common concern: “Why isn’t my portfolio reflecting the same gains?” This question prompted Asunaro's compliance team to undertake a detailed statistical study to analyze the correlation between individual stock performance and the Nikkei Index.

Utilizing data sourced from QUICK, a financial market data provider, the analysis focused on daily price changes over 180 trading days. Regression analysis was employed to ascertain the degree to which stock price variations could be explained by movements in the Nikkei Average.

The results highlighted a minimal correlation for small-cap growth stocks, prompting investors to seriously rethink their strategies and approaches.

Analysis Overview

The study relied on modern portfolio theory, as proposed by notable economists like Markowitz and Sharpe, which divides stock price changes into two categories: market factors affecting the overall index and individual factors unique to specific companies. The analysis categorized the Nikkei Average as the market and scrutinized the extent to which individual stock performances could be accounted for by movements in the index.

Notable Findings: Case Analyses

Small-Cap Growth Stocks

Analyzing small-cap stocks often favored by individual investors uncovered results that emphasized their independence from the Nikkei fluctuations:

• - IoLe (2334): 0.3% explained by Nikkei | 99.7% unique.
• - FulltaFullta (2586): 3.0% explained by Nikkei | 97.0% unique.
• - Data Section (3905): 1.5% explained by Nikkei | 98.5% unique.
• - Liberta (4935): 4.4% explained by Nikkei | 95.6% unique.
• - Convano (6574): 0.0% explained by Nikkei | 100.0% unique.
• - Cellseed (7776): 3.7% explained by Nikkei | 96.3% unique.

This data affirms that the majority of price movements in these stocks occur independently, driven by individual corporate performance factors rather than broader market shifts.

Comparison with Large-Cap Stocks

Conversely, larger stocks that significantly impact the Nikkei Index exhibited starkly different behaviors. For instance:

• - Advantest (6857): Approximately 50.4% explained by Nikkei.
• - SoftBank Group (9984): Approximately 55.3% explained by Nikkei.
• - Fast Retailing (9983): Approximately 53.0% explained by Nikkei.

These figures illustrate how such large corporations’ movements are closely tied to the Nikkei, mainly due to their substantial weighting in the index.

Conclusion: Addressing the Discrepancy

Through rigorous analysis, Asunaro has surfaced crucial insights that elucidate why many individual investors may struggle to see their stocks rise alongside the Nikkei Average.
The key takeaway is that smaller growth stocks, often characterized by unique growth stories and developments, do not inherently mirror market trends. Investors are urged to focus on the fundamentals and growth prospects of individual businesses instead of the overall market metrics.

Asunaro's Commitment

Going forward, Asunaro Investment Advisors remains committed to closely monitoring macro market trends while equipping individual investors with the insights needed to make informed decisions based on company-specific parameters. Through ongoing statistical analysis and a focus on data-driven insights, Asunaro aims to clarify and streamline the investment process for its clients.

We appreciate your continued support and look forward to empowering investors in their journeys ahead.