Correlation Between Take Two and Aristocrat Leisure

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

Diversification Opportunities for Take Two and Aristocrat Leisure

0.97

Correlation Coefficient

Take Two  Aristocrat Leisure

Almost no diversification

The 3 months correlation between Take and Aristocrat is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Take Two i.e., Take Two and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Take Two and Aristocrat Leisure

Assuming the 90 days horizon Take Two Interactive Software is expected to generate 0.98 times more return on investment than Aristocrat Leisure. However, Take Two Interactive Software is 1.02 times less risky than Aristocrat Leisure. It trades about -0.02 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about -0.12 per unit of risk. If you would invest  17,936  in Take Two Interactive Software on October 5, 2024 and sell it today you would lose (110.00) from holding Take Two Interactive Software or give up 0.61% of portfolio value 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.  Aristocrat Leisure Limited

Take Two Interactive

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Take Two Interactive Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Take Two reported solid returns over the last few months and may actually be approaching a breakup point.

Aristocrat Leisure

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Aristocrat Leisure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Aristocrat Leisure reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and Aristocrat Leisure

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

The idea behind Take Two Interactive Software and Aristocrat Leisure Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.