Correlation Between Take Two and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Take Two and Smithson Investment 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 Smithson Investment 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 Smithson Investment Trust, you can compare the effects of market volatilities on Take Two and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take Two and Smithson Investment.
Diversification Opportunities for Take Two and Smithson Investment
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Take and Smithson is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Take Two i.e., Take Two and Smithson Investment go up and down completely randomly.
Pair Corralation between Take Two and Smithson Investment
Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 1.76 times more return on investment than Smithson Investment. However, Take Two is 1.76 times more volatile than Smithson Investment Trust. It trades about 0.41 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.14 per unit of risk. If you would invest 16,034 in Take Two Interactive Software on August 24, 2024 and sell it today you would earn a total of 2,659 from holding Take Two Interactive Software or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Take Two Interactive Software vs. Smithson Investment Trust
Performance |
| Timeline |
| Take Two Interactive |
| Smithson Investment Trust |
Take Two and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Take Two and Smithson Investment
The main advantage of trading using opposite Take Two and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Take Two vs. Quadrise Plc | Take Two vs. Intuitive Investments Group | Take Two vs. European Metals Holdings | Take Two vs. Athelney Trust plc |
| Smithson Investment vs. Sabre Insurance Group | Smithson Investment vs. Take Two Interactive Software | Smithson Investment vs. Zurich Insurance Group | Smithson Investment vs. Wheaton Precious Metals |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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