Correlation Between VARIOUS EATERIES and Take-Two Interactive

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

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

Diversification Opportunities for VARIOUS EATERIES and Take-Two Interactive

0.28

Correlation Coefficient

VARIOUS EATERIES  Take-Two Interactive

Modest diversification

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

Pair Corralation between VARIOUS EATERIES and Take-Two Interactive

Assuming the 90 days horizon VARIOUS EATERIES is expected to generate 34.06 times less return on investment than Take-Two Interactive. In addition to that, VARIOUS EATERIES is 1.03 times more volatile than Take Two Interactive Software. It trades about 0.01 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.26 per unit of volatility. If you would invest  13,880  in Take Two Interactive Software on September 12, 2024 and sell it today you would earn a total of  3,714  from holding Take Two Interactive Software or generate 26.76% return on investment over 90 days.

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

VARIOUS EATERIES LS  vs.  Take Two Interactive Software

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Take Two Interactive

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Take-Two Interactive reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and Take-Two Interactive

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

The idea behind VARIOUS EATERIES LS and Take Two Interactive Software 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.