Correlation Between Associated British and Take Two

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Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Take Two Interactive Software, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Take Two.

Diversification Opportunities for Associated British and Take Two

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Associated and Take is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods 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 Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Take Two go up and down completely randomly.

Pair Corralation between Associated British and Take Two

Assuming the 90 days trading horizon Associated British is expected to generate 1.86 times less return on investment than Take Two. But when comparing it to its historical volatility, Associated British Foods is 1.25 times less risky than Take Two. It trades about 0.05 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,240  in Take Two Interactive Software on September 20, 2024 and sell it today you would earn a total of  8,472  from holding Take Two Interactive Software or generate 82.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.4%
ValuesDaily Returns

Associated British Foods  vs.  Take Two Interactive Software

 Performance 
       Timeline  
Associated British Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Associated British is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
Take Two Interactive 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Take Two unveiled solid returns over the last few months and may actually be approaching a breakup point.

Associated British and Take Two Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Associated British and Take Two

The main advantage of trading using opposite Associated British and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.
The idea behind Associated British Foods and Take Two Interactive Software 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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