Correlation Between Square Enix and Take Two

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

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

Diversification Opportunities for Square Enix and Take Two

0.28

Correlation Coefficient

Square Enix  Take Two

Modest diversification

The 3 months correlation between Square and Take is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Square Enix Holdings 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 Square Enix 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 Square Enix Holdings 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 Square Enix i.e., Square Enix and Take Two go up and down completely randomly.

Pair Corralation between Square Enix and Take Two

Assuming the 90 days horizon Square Enix Holdings is expected to under-perform the Take Two. But the pink sheet apears to be less risky and, when comparing its historical volatility, Square Enix Holdings is 1.05 times less risky than Take Two. The pink sheet trades about -0.24 of its potential returns per unit of risk. The Take Two Interactive Software is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,539  in Take Two Interactive Software on October 25, 2024 and sell it today you would earn a total of  260.00  from holding Take Two Interactive Software or generate 1.4% return on investment over 90 days.

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

Square Enix Holdings  vs.  Take Two Interactive Software

Square Enix Holdings

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Square Enix Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Square Enix may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Take Two Interactive

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Take Two displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Square Enix and Take Two

The main advantage of trading using opposite Square Enix and Take Two positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Square Enix 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 Square Enix Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.