Correlation Between Take Two and Advanced Medical

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

By analyzing existing cross correlation between Take Two Interactive Software and Advanced Medical Solutions, you can compare the effects of market volatilities on Take Two and Advanced Medical 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 Take Two with a short position of Advanced Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take Two and Advanced Medical.

Diversification Opportunities for Take Two and Advanced Medical

-0.28

Correlation Coefficient

Take Two  Advanced Medical

Very good diversification

The 3 months correlation between Take and Advanced is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol and Take Two 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 Take Two Interactive Software are associated (or correlated) with Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Take Two i.e., Take Two and Advanced Medical go up and down completely randomly.

Pair Corralation between Take Two and Advanced Medical

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 0.46 times more return on investment than Advanced Medical. However, Take Two Interactive Software is 2.16 times less risky than Advanced Medical. It trades about 0.2 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about -0.09 per unit of risk. If you would invest  15,573  in Take Two Interactive Software on September 19, 2024 and sell it today you would earn a total of  3,139  from holding Take Two Interactive Software or generate 20.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Take Two Interactive Software  vs.  Advanced Medical Solutions

Take Two Interactive

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Take Two unveiled solid returns over the last few months and may actually be approaching a breakup point.

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Take Two and Advanced Medical

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

The idea behind Take Two Interactive Software and Advanced Medical Solutions 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.