Correlation Between Take Two and Microsoft
Can any of the company-specific risk be diversified away by investing in both Take Two and Microsoft 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 and Microsoft 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 Microsoft, you can compare the effects of market volatilities on Take Two and Microsoft 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 with a short position of Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take Two and Microsoft.
Diversification Opportunities for Take Two and Microsoft
Poor diversification
The 3 months correlation between Take and Microsoft is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Take Two 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Take Two i.e., Take Two and Microsoft go up and down completely randomly.
Pair Corralation between Take Two and Microsoft
Assuming the 90 days horizon Take Two Interactive Software is expected to generate 1.3 times more return on investment than Microsoft. However, Take Two is 1.3 times more volatile than Microsoft. It trades about 0.07 of its potential returns per unit of risk. Microsoft is currently generating about 0.08 per unit of risk. If you would invest 9,539 in Take Two Interactive Software on August 29, 2024 and sell it today you would earn a total of 8,183 from holding Take Two Interactive Software or generate 85.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Take Two Interactive Software vs. Microsoft
Performance |
| Timeline |
| Take Two Interactive |
| Microsoft |
Take Two and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Take Two and Microsoft
The main advantage of trading using opposite Take Two and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Take Two vs. Sea Limited | Take Two vs. Superior Plus Corp | Take Two vs. NMI Holdings | Take Two vs. SIVERS SEMICONDUCTORS AB |
| Microsoft vs. SERI INDUSTRIAL EO | Microsoft vs. AIR PRODCHEMICALS | Microsoft vs. KINGBOARD CHEMICAL | Microsoft vs. Quaker Chemical |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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