Correlation Between Take Two and Gilead Sciences

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

Diversification Opportunities for Take Two and Gilead Sciences

0.88

Correlation Coefficient

Take Two  Gilead Sciences

Very poor diversification

The 3 months correlation between Take and Gilead is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences 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 Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of Take Two i.e., Take Two and Gilead Sciences go up and down completely randomly.

Pair Corralation between Take Two and Gilead Sciences

Assuming the 90 days trading horizon Take Two Interactive Software is expected to under-perform the Gilead Sciences. In addition to that, Take Two is 2.99 times more volatile than Gilead Sciences. It trades about -0.07 of its total potential returns per unit of risk. Gilead Sciences is currently generating about -0.14 per unit of volatility. If you would invest  29,010  in Gilead Sciences on October 25, 2024 and sell it today you would lose (754.00) from holding Gilead Sciences or give up 2.6% of portfolio value over 90 days.

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

Take Two Interactive Software  vs.  Gilead Sciences

Take Two Interactive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 11 (%) 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.

Gilead Sciences

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gilead Sciences are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Gilead Sciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and Gilead Sciences

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

The idea behind Take Two Interactive Software and Gilead Sciences 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..