Correlation Between Take Two and Prudential Plc

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

Diversification Opportunities for Take Two and Prudential Plc

0.57

Correlation Coefficient

Take Two  Prudential Plc

Very weak diversification

The 3 months correlation between Take and Prudential is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential 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 Prudential Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential plc has no effect on the direction of Take Two i.e., Take Two and Prudential Plc go up and down completely randomly.

Pair Corralation between Take Two and Prudential Plc

Assuming the 90 days trading horizon Take Two is expected to generate 1.93 times less return on investment than Prudential Plc. In addition to that, Take Two is 1.51 times more volatile than Prudential plc. It trades about 0.05 of its total potential returns per unit of risk. Prudential plc is currently generating about 0.15 per unit of volatility. If you would invest  2,432  in Prudential plc on December 26, 2024 and sell it today you would earn a total of  463.00  from holding Prudential plc or generate 19.04% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Prudential plc

Take Two Interactive

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Take Two may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Prudential plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Prudential Plc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and Prudential Plc

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

The idea behind Take Two Interactive Software and Prudential 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 Transaction History module to view history of all your transactions and understand their impact on performance.