Correlation Between Take Two and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Take Two and Spirent Communications 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 Spirent Communications 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 Spirent Communications plc, you can compare the effects of market volatilities on Take Two and Spirent Communications 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 Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take Two and Spirent Communications.
Diversification Opportunities for Take Two and Spirent Communications
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Take and Spirent is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications 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 Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Take Two i.e., Take Two and Spirent Communications go up and down completely randomly.
Pair Corralation between Take Two and Spirent Communications
Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 0.48 times more return on investment than Spirent Communications. However, Take Two Interactive Software is 2.07 times less risky than Spirent Communications. It trades about 0.08 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.02 per unit of risk. If you would invest 11,213 in Take Two Interactive Software on December 2, 2024 and sell it today you would earn a total of 9,699 from holding Take Two Interactive Software or generate 86.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.81% |
| Values | Daily Returns |
Take Two Interactive Software vs. Spirent Communications plc
Performance |
| Timeline |
| Take Two Interactive |
| Spirent Communications |
Take Two and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Take Two and Spirent Communications
The main advantage of trading using opposite Take Two and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two position performs unexpectedly, Spirent Communications 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 Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Take Two vs. UNIQA Insurance Group | ||
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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