Correlation Between Take Two and BP Plc

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

Diversification Opportunities for Take Two and BP Plc

0.28

Correlation Coefficient

Take Two  BP Plc

Modest diversification

The 3 months correlation between Take and B1PP34 is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Take Two i.e., Take Two and BP Plc go up and down completely randomly.

Pair Corralation between Take Two and BP Plc

Assuming the 90 days trading horizon Take Two Interactive Software is expected to under-perform the BP Plc. In addition to that, Take Two is 1.54 times more volatile than BP plc. It trades about -0.05 of its total potential returns per unit of risk. BP plc is currently generating about 0.19 per unit of volatility. If you would invest  4,584  in BP plc on October 10, 2024 and sell it today you would earn a total of  236.00  from holding BP plc or generate 5.15% return on investment over 90 days.

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

Take Two Interactive Software  vs.  BP plc

Take Two Interactive

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Take Two sustained solid returns over the last few months and may actually be approaching a breakup point.

BP plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BP Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Take Two and BP Plc

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

The idea behind Take Two Interactive Software and BP plc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.