Correlation Between Waste Management and Take Two
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and Take Two Interactive Software, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Take Two.
Diversification Opportunities for Waste Management and Take Two
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Waste and Take is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management 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 Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Take Two go up and down completely randomly.
Pair Corralation between Waste Management and Take Two
Assuming the 90 days trading horizon Waste Management is expected to generate 1.57 times less return on investment than Take Two. But when comparing it to its historical volatility, Waste Management is 1.2 times less risky than Take Two. It trades about 0.1 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 18,226 in Take Two Interactive Software on August 27, 2024 and sell it today you would earn a total of 8,976 from holding Take Two Interactive Software or generate 49.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.89% |
| Values | Daily Returns |
Waste Management vs. Take Two Interactive Software
Performance |
| Timeline |
| Waste Management |
| Take Two Interactive |
Waste Management and Take Two Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and Take Two
The main advantage of trading using opposite Waste Management and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Bemobi Mobile Tech | Waste Management vs. UnitedHealth Group Incorporated | Waste Management vs. United Rentals | Waste Management vs. Metalurgica Gerdau SA |
| Take Two vs. Technos SA | Take Two vs. Palantir Technologies | Take Two vs. Deutsche Bank Aktiengesellschaft | Take Two vs. Align Technology |
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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