Correlation Between Take Two and Waste Management

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

Diversification Opportunities for Take Two and Waste Management

0.96

Correlation Coefficient

Take Two  Waste Management

Almost no diversification

The 3 months correlation between Take and Waste is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Take Two i.e., Take Two and Waste Management go up and down completely randomly.

Pair Corralation between Take Two and Waste Management

Assuming the 90 days trading horizon Take Two Interactive Software is expected to generate 1.16 times more return on investment than Waste Management. However, Take Two is 1.16 times more volatile than Waste Management. It trades about 0.28 of its potential returns per unit of risk. Waste Management is currently generating about 0.15 per unit of risk. If you would invest  21,318  in Take Two Interactive Software on September 13, 2024 and sell it today you would earn a total of  7,158  from holding Take Two Interactive Software or generate 33.58% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Waste Management

Take Two Interactive

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 22 (%) 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.

Waste Management

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Waste Management sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and Waste Management

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

The idea behind Take Two Interactive Software and Waste Management 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.