Correlation Between Boston Beer and Take Two

Can any of the company-specific risk be diversified away by investing in both Boston Beer 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 Boston Beer and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Boston Beer and Take Two Interactive Software, you can compare the effects of market volatilities on Boston Beer 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 Boston Beer with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Beer and Take Two.

Diversification Opportunities for Boston Beer and Take Two

0.29

Correlation Coefficient

Boston Beer  Take Two

Modest diversification

The 3 months correlation between Boston and Take is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Boston Beer 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 Boston Beer 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 The Boston Beer 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 Boston Beer i.e., Boston Beer and Take Two go up and down completely randomly.

Pair Corralation between Boston Beer and Take Two

Assuming the 90 days trading horizon The Boston Beer is expected to under-perform the Take Two. In addition to that, Boston Beer is 1.1 times more volatile than Take Two Interactive Software. It trades about -0.13 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.2 per unit of volatility. If you would invest  15,024  in Take Two Interactive Software on October 24, 2024 and sell it today you would earn a total of  2,854  from holding Take Two Interactive Software or generate 19.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Boston Beer  vs.  Take Two Interactive Software

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Take Two Interactive

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Take Two reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Beer and Take Two

The main advantage of trading using opposite Boston Beer and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Beer 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.

The idea behind The Boston Beer and Take Two Interactive Software 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.