Correlation Between Take Two and Solstad Offshore

Can any of the company-specific risk be diversified away by investing in both Take Two and Solstad Offshore 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 Solstad Offshore 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 Solstad Offshore ASA, you can compare the effects of market volatilities on Take Two and Solstad Offshore 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 Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take Two and Solstad Offshore.

Diversification Opportunities for Take Two and Solstad Offshore

-0.66

Correlation Coefficient

Take Two  Solstad Offshore

Excellent diversification

The 3 months correlation between Take and Solstad is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Take Two i.e., Take Two and Solstad Offshore go up and down completely randomly.

Pair Corralation between Take Two and Solstad Offshore

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 1.33 times more return on investment than Solstad Offshore. However, Take Two is 1.33 times more volatile than Solstad Offshore ASA. It trades about 0.11 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about -0.07 per unit of risk. If you would invest  18,501  in Take Two Interactive Software on December 28, 2024 and sell it today you would earn a total of  3,041  from holding Take Two Interactive Software or generate 16.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Take Two Interactive Software  vs.  Solstad Offshore ASA

Take Two Interactive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 8 (%) 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.

Solstad Offshore ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Take Two and Solstad Offshore

The main advantage of trading using opposite Take Two and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.

The idea behind Take Two Interactive Software and Solstad Offshore ASA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.