Correlation Between Take-Two Interactive and Aristocrat Leisure

Can any of the company-specific risk be diversified away by investing in both Take-Two Interactive 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 Interactive 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 Interactive 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 Interactive with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take-Two Interactive and Aristocrat Leisure.

Diversification Opportunities for Take-Two Interactive and Aristocrat Leisure

0.97

Correlation Coefficient

Take-Two Interactive  Aristocrat Leisure

Almost no diversification

The 3 months correlation between Take-Two 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 Interactive 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 Interactive i.e., Take-Two Interactive and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Take-Two Interactive and Aristocrat Leisure

Assuming the 90 days horizon Take-Two Interactive is expected to generate 1.18 times less return on investment than Aristocrat Leisure. In addition to that, Take-Two Interactive is 1.05 times more volatile than Aristocrat Leisure Limited. It trades about 0.08 of its total potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.09 per unit of volatility. If you would invest  1,977  in Aristocrat Leisure Limited on October 4, 2024 and sell it today you would earn a total of  2,143  from holding Aristocrat Leisure Limited or generate 108.4% 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.  Aristocrat Leisure Limited

Take Two Interactive

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Take-Two Interactive reported solid returns over the last few months and may actually be approaching a breakup point.

Aristocrat Leisure

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. 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 Interactive and Aristocrat Leisure

The main advantage of trading using opposite Take-Two Interactive and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take-Two Interactive 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.