Correlation Between Take-Two Interactive and Home Depot
Can any of the company-specific risk be diversified away by investing in both Take-Two Interactive and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on Take-Two Interactive and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take-Two Interactive and Home Depot.
Diversification Opportunities for Take-Two Interactive and Home Depot
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Take-Two and Home is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and Home Depot go up and down completely randomly.
Pair Corralation between Take-Two Interactive and Home Depot
Assuming the 90 days horizon Take Two Interactive Software is expected to generate 1.12 times more return on investment than Home Depot. However, Take-Two Interactive is 1.12 times more volatile than The Home Depot. It trades about -0.07 of its potential returns per unit of risk. The Home Depot is currently generating about -0.17 per unit of risk. If you would invest 17,870 in Take Two Interactive Software on October 17, 2024 and sell it today you would lose (294.00) from holding Take Two Interactive Software or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Take Two Interactive Software vs. The Home Depot
Performance |
| Timeline |
| Take Two Interactive |
| Home Depot |
Take-Two Interactive and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Take-Two Interactive and Home Depot
The main advantage of trading using opposite Take-Two Interactive and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take-Two Interactive position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Take-Two Interactive vs. JD SPORTS FASH | Take-Two Interactive vs. MINCO SILVER | Take-Two Interactive vs. De Grey Mining | Take-Two Interactive vs. Yanzhou Coal Mining |
| Home Depot vs. MOVIE GAMES SA | Home Depot vs. Take Two Interactive Software | Home Depot vs. GRIFFIN MINING LTD | Home Depot vs. Stag Industrial |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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