Correlation Between Take-Two Interactive and CPU SOFTWAREHOUSE

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

Diversification Opportunities for Take-Two Interactive and CPU SOFTWAREHOUSE

-0.38

Correlation Coefficient

Take-Two Interactive  CPU SOFTWAREHOUSE

Very good diversification

The 3 months correlation between Take-Two and CPU is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and CPU SOFTWAREHOUSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPU SOFTWAREHOUSE and Take-Two Interactive 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 CPU SOFTWAREHOUSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPU SOFTWAREHOUSE has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and CPU SOFTWAREHOUSE go up and down completely randomly.

Pair Corralation between Take-Two Interactive and CPU SOFTWAREHOUSE

Assuming the 90 days horizon Take Two Interactive Software is expected to generate 0.91 times more return on investment than CPU SOFTWAREHOUSE. However, Take Two Interactive Software is 1.1 times less risky than CPU SOFTWAREHOUSE. It trades about 0.46 of its potential returns per unit of risk. CPU SOFTWAREHOUSE is currently generating about 0.22 per unit of risk. If you would invest  15,072  in Take Two Interactive Software on September 4, 2024 and sell it today you would earn a total of  2,780  from holding Take Two Interactive Software or generate 18.44% return on investment over 90 days.

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

Take Two Interactive Software  vs.  CPU SOFTWAREHOUSE

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 fragile basic indicators, Take-Two Interactive reported solid returns over the last few months and may actually be approaching a breakup point.

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CPU SOFTWAREHOUSE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Take-Two Interactive and CPU SOFTWAREHOUSE

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

The idea behind Take Two Interactive Software and CPU SOFTWAREHOUSE 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.