Correlation Between Take Two and Telefnica

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

Diversification Opportunities for Take Two and Telefnica

-0.16

Correlation Coefficient

Take Two  Telefnica

Good diversification

The 3 months correlation between Take and Telefnica is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA 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 Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Take Two i.e., Take Two and Telefnica go up and down completely randomly.

Pair Corralation between Take Two and Telefnica

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 0.79 times more return on investment than Telefnica. However, Take Two Interactive Software is 1.26 times less risky than Telefnica. It trades about 0.25 of its potential returns per unit of risk. Telefnica SA is currently generating about -0.08 per unit of risk. If you would invest  21,340  in Take Two Interactive Software on October 10, 2024 and sell it today you would earn a total of  6,529  from holding Take Two Interactive Software or generate 30.6% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Telefnica SA

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.

Telefnica SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefnica SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Take Two and Telefnica

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

The idea behind Take Two Interactive Software and Telefnica SA 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.