I would possibly correct it until the child had an opinion...& then leave it up to them.
I recently taught a lad who had a shortened name. His mates all referred to him as 'Len' (for example).
Come Parents' Evening, I did what I always do when in doubt & went formal: 'Leonard has been working well...'
Mum 'Oh thank GOODNESS for you, Mrs Raven, all the other teachers have called him Len, gosh, we really don't like that, do we Leonard...'
OK, noted! So I scrupulously called him Leonard until one lesson when he begged me to stop '...miss, honestly, it's Len...it's just my mum's got a bit of a thing about it...'.
His friends all promptly fell about; they'd all known him as Len for several years & whenever any of them had been to his house his mum made a point of hissing 'It's Leo-NARD!' at them.
Poor Len was 15. His mum was clearly fighting a losing battle.