Correlation Between Take Two and Auto Trader

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

Diversification Opportunities for Take Two and Auto Trader

-0.77

Correlation Coefficient

Take Two  Auto Trader

Pay attention - limited upside

The 3 months correlation between Take and Auto is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Take Two i.e., Take Two and Auto Trader go up and down completely randomly.

Pair Corralation between Take Two and Auto Trader

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 1.18 times more return on investment than Auto Trader. However, Take Two is 1.18 times more volatile than Auto Trader Group. It trades about 0.08 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.07 per unit of risk. If you would invest  10,636  in Take Two Interactive Software on September 4, 2024 and sell it today you would earn a total of  8,134  from holding Take Two Interactive Software or generate 76.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Take Two Interactive Software  vs.  Auto Trader Group

Take Two Interactive

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Take Two unveiled solid returns over the last few months and may actually be approaching a breakup point.

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Auto Trader is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Take Two and Auto Trader

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

The idea behind Take Two Interactive Software and Auto Trader Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.