Correlation Between American Homes and Take Two
Can any of the company-specific risk be diversified away by investing in both American Homes 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 American Homes and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Take Two Interactive Software, you can compare the effects of market volatilities on American Homes 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 American Homes with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Take Two.
Diversification Opportunities for American Homes and Take Two
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Take is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 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 American Homes 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 American Homes 4 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 American Homes i.e., American Homes and Take Two go up and down completely randomly.
Pair Corralation between American Homes and Take Two
Assuming the 90 days trading horizon American Homes is expected to generate 1.46 times less return on investment than Take Two. In addition to that, American Homes is 1.17 times more volatile than Take Two Interactive Software. It trades about 0.05 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.09 per unit of volatility. If you would invest 14,894 in Take Two Interactive Software on September 1, 2024 and sell it today you would earn a total of 3,004 from holding Take Two Interactive Software or generate 20.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Take Two Interactive Software
Performance |
| Timeline |
| American Homes 4 |
| Take Two Interactive |
American Homes and Take Two Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Take Two
The main advantage of trading using opposite American Homes and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes 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.| American Homes vs. UDR Inc | American Homes vs. Superior Plus Corp | American Homes vs. Origin Agritech | American Homes vs. Identiv |
| Take Two vs. Nintendo Co | Take Two vs. Sea Limited | Take Two vs. Superior Plus Corp | Take Two vs. NMI Holdings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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