Correlation Between Lindsell Train and Take Two

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

Diversification Opportunities for Lindsell Train and Take Two

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Lindsell and Take is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment 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 Lindsell Train 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 Lindsell Train Investment 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 Lindsell Train i.e., Lindsell Train and Take Two go up and down completely randomly.

Pair Corralation between Lindsell Train and Take Two

Assuming the 90 days trading horizon Lindsell Train Investment is expected to under-perform the Take Two. In addition to that, Lindsell Train is 1.16 times more volatile than Take Two Interactive Software. It trades about -0.07 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.38 per unit of volatility. If you would invest  16,269  in Take Two Interactive Software on August 31, 2024 and sell it today you would earn a total of  2,485  from holding Take Two Interactive Software or generate 15.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Lindsell Train Investment  vs.  Take Two Interactive Software

 Performance 
       Timeline  
Lindsell Train Investment 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lindsell Train Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Take Two Interactive 

Risk-Adjusted Performance

13 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 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Take Two unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lindsell Train and Take Two Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lindsell Train and Take Two

The main advantage of trading using opposite Lindsell Train and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train 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 Lindsell Train Investment 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.
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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