Correlation Between Take Two and Bodycote PLC

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

Diversification Opportunities for Take Two and Bodycote PLC

0.66

Correlation Coefficient

Take Two  Bodycote PLC

Poor diversification

The 3 months correlation between Take and Bodycote is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Bodycote PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodycote PLC 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 Bodycote PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodycote PLC has no effect on the direction of Take Two i.e., Take Two and Bodycote PLC go up and down completely randomly.

Pair Corralation between Take Two and Bodycote PLC

Assuming the 90 days trading horizon Take Two Interactive Software is expected to under-perform the Bodycote PLC. But the stock apears to be less risky and, when comparing its historical volatility, Take Two Interactive Software is 1.09 times less risky than Bodycote PLC. The stock trades about -0.15 of its potential returns per unit of risk. The Bodycote PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  61,600  in Bodycote PLC on September 25, 2024 and sell it today you would earn a total of  1,100  from holding Bodycote PLC or generate 1.79% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Bodycote PLC

Take Two Interactive

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 18 (%) 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.

Bodycote PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bodycote PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bodycote PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Take Two and Bodycote PLC

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

The idea behind Take Two Interactive Software and Bodycote PLC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.