Correlation Between Take Two and Premier Foods

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

Diversification Opportunities for Take Two and Premier Foods

0.45

Correlation Coefficient

Take Two  Premier Foods

Very weak diversification

The 3 months correlation between Take and Premier is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Take Two i.e., Take Two and Premier Foods go up and down completely randomly.

Pair Corralation between Take Two and Premier Foods

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 1.2 times more return on investment than Premier Foods. However, Take Two is 1.2 times more volatile than Premier Foods PLC. It trades about 0.25 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.08 per unit of risk. If you would invest  14,931  in Take Two Interactive Software on September 21, 2024 and sell it today you would earn a total of  3,469  from holding Take Two Interactive Software or generate 23.23% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Premier Foods PLC

Take Two Interactive

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 19 (%) 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.

Premier Foods PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Take Two and Premier Foods

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

The idea behind Take Two Interactive Software and Premier Foods 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.