Correlation Between Este Lauder and Take Two

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

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

Diversification Opportunities for Este Lauder and Take Two

-0.45

Correlation Coefficient

Este Lauder  Take Two

Very good diversification

The 3 months correlation between Este and Take is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Este Lauder 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 Este Lauder 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 The Este Lauder are associated (or correlated) with Take Two. 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 Este Lauder i.e., Este Lauder and Take Two go up and down completely randomly.

Pair Corralation between Este Lauder and Take Two

Assuming the 90 days trading horizon The Este Lauder is expected to under-perform the Take Two. In addition to that, Este Lauder is 2.3 times more volatile than Take Two Interactive Software. It trades about -0.02 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.3 per unit of volatility. If you would invest  20,622  in Take Two Interactive Software on September 24, 2024 and sell it today you would earn a total of  7,574  from holding Take Two Interactive Software or generate 36.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

The Este Lauder  vs.  Take Two Interactive Software

Este Lauder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Este Lauder is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Take Two Interactive

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Take Two sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Este Lauder and Take Two

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

The idea behind The Este Lauder 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.