Correlation Between Take Two and Lockheed Martin

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

Diversification Opportunities for Take Two and Lockheed Martin

-0.25

Correlation Coefficient

Take Two  Lockheed Martin

Very good diversification

The 3 months correlation between Take and Lockheed is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Take Two i.e., Take Two and Lockheed Martin go up and down completely randomly.

Pair Corralation between Take Two and Lockheed Martin

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 1.14 times more return on investment than Lockheed Martin. However, Take Two is 1.14 times more volatile than Lockheed Martin. It trades about 0.16 of its potential returns per unit of risk. Lockheed Martin is currently generating about 0.08 per unit of risk. If you would invest  18,525  in Take Two Interactive Software on October 9, 2024 and sell it today you would earn a total of  10,504  from holding Take Two Interactive Software or generate 56.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.59%
Values	Daily Returns

Take Two Interactive Software  vs.  Lockheed Martin

Take Two Interactive

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 23 (%) 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.

Lockheed Martin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Take Two and Lockheed Martin

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

The idea behind Take Two Interactive Software and Lockheed Martin 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.