Correlation Between Take Two and Valero Energy

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

Diversification Opportunities for Take Two and Valero Energy

0.27

Correlation Coefficient

Take Two  Valero Energy

Modest diversification

The 3 months correlation between Take and Valero is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Take Two i.e., Take Two and Valero Energy go up and down completely randomly.

Pair Corralation between Take Two and Valero Energy

Assuming the 90 days trading horizon Take Two Interactive Software is expected to under-perform the Valero Energy. In addition to that, Take Two is 1.49 times more volatile than Valero Energy. It trades about -0.1 of its total potential returns per unit of risk. Valero Energy is currently generating about 0.36 per unit of volatility. If you would invest  36,898  in Valero Energy on October 25, 2024 and sell it today you would earn a total of  5,182  from holding Valero Energy or generate 14.04% 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.  Valero Energy

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.

Valero Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Take Two and Valero Energy

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

The idea behind Take Two Interactive Software and Valero Energy 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.