Correlation Between Clover Health and Take Two

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

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

Diversification Opportunities for Clover Health and Take Two

-0.56

Correlation Coefficient

Clover Health  Take Two

Excellent diversification

The 3 months correlation between Clover and Take is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, 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 Clover Health 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 Clover Health Investments, 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 Clover Health i.e., Clover Health and Take Two go up and down completely randomly.

Pair Corralation between Clover Health and Take Two

Assuming the 90 days trading horizon Clover Health is expected to generate 1.18 times less return on investment than Take Two. In addition to that, Clover Health is 1.48 times more volatile than Take Two Interactive Software. It trades about 0.09 of its total potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.16 per unit of volatility. If you would invest  22,931  in Take Two Interactive Software on October 23, 2024 and sell it today you would earn a total of  5,035  from holding Take Two Interactive Software or generate 21.96% return on investment over 90 days.

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

Clover Health Investments,  vs.  Take Two Interactive Software

Clover Health Invest

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clover Health Investments, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Clover Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Take Two Interactive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Take Two sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clover Health and Take Two

The main advantage of trading using opposite Clover Health and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clover Health 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 Clover Health Investments, 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.