Correlation Between Take-Two Interactive and American Eagle
Can any of the company-specific risk be diversified away by investing in both Take-Two Interactive and American Eagle 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 Interactive and American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on Take-Two Interactive and American Eagle 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 Interactive with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take-Two Interactive and American Eagle.
Diversification Opportunities for Take-Two Interactive and American Eagle
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Take-Two and American is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters and Take-Two Interactive 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and American Eagle go up and down completely randomly.
Pair Corralation between Take-Two Interactive and American Eagle
Assuming the 90 days horizon Take Two Interactive Software is expected to generate 0.7 times more return on investment than American Eagle. However, Take Two Interactive Software is 1.42 times less risky than American Eagle. It trades about 0.09 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about -0.11 per unit of risk. If you would invest 17,826 in Take Two Interactive Software on November 3, 2024 and sell it today you would earn a total of 506.00 from holding Take Two Interactive Software or generate 2.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Take Two Interactive Software vs. American Eagle Outfitters
Performance |
| Timeline |
| Take Two Interactive |
| American Eagle Outfitters |
Take-Two Interactive and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Take-Two Interactive and American Eagle
The main advantage of trading using opposite Take-Two Interactive and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take-Two Interactive position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| Take-Two Interactive vs. Nintendo Co | Take-Two Interactive vs. Nintendo Co | Take-Two Interactive vs. Sea Limited | Take-Two Interactive vs. Electronic Arts |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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