Correlation Between Sea and Take Two

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

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

Diversification Opportunities for Sea and Take Two

0.86

Correlation Coefficient

Sea  Take Two

Very poor diversification

The 3 months correlation between Sea and Take is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sea 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 Sea 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 Sea 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 Sea i.e., Sea and Take Two go up and down completely randomly.

Pair Corralation between Sea and Take Two

Allowing for the 90-day total investment horizon Sea is expected to generate 1.2 times more return on investment than Take Two. However, Sea is 1.2 times more volatile than Take Two Interactive Software. It trades about 0.09 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.08 per unit of risk. If you would invest  11,579  in Sea on December 17, 2024 and sell it today you would earn a total of  1,685  from holding Sea or generate 14.55% return on investment over 90 days.

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

Sea  vs.  Take Two Interactive Software

Sea

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Take Two Interactive

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Take Two may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sea and Take Two

The main advantage of trading using opposite Sea and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.