Correlation Between Take Two and Dell Technologies

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

Diversification Opportunities for Take Two and Dell Technologies

0.82

Correlation Coefficient

Take Two  Dell Technologies

Very poor diversification

The 3 months correlation between Take and Dell is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Take Two i.e., Take Two and Dell Technologies go up and down completely randomly.

Pair Corralation between Take Two and Dell Technologies

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 0.55 times more return on investment than Dell Technologies. However, Take Two Interactive Software is 1.83 times less risky than Dell Technologies. It trades about 0.27 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.13 per unit of risk. If you would invest  21,812  in Take Two Interactive Software on September 3, 2024 and sell it today you would earn a total of  6,530  from holding Take Two Interactive Software or generate 29.94% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Dell Technologies

Take Two Interactive

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 21 (%) 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.

Dell Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and Dell Technologies

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

The idea behind Take Two Interactive Software and Dell Technologies 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.