Correlation Between Take-Two Interactive and Constellation Brands

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

Diversification Opportunities for Take-Two Interactive and Constellation Brands

0.21

Correlation Coefficient

Take-Two Interactive  Constellation Brands

Modest diversification

The 3 months correlation between Take-Two and Constellation is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Constellation Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Brands 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 Constellation Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Brands has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and Constellation Brands go up and down completely randomly.

Pair Corralation between Take-Two Interactive and Constellation Brands

Assuming the 90 days horizon Take Two Interactive Software is expected to generate 1.23 times more return on investment than Constellation Brands. However, Take-Two Interactive is 1.23 times more volatile than Constellation Brands. It trades about 0.09 of its potential returns per unit of risk. Constellation Brands is currently generating about -0.24 per unit of risk. If you would invest  17,786  in Take Two Interactive Software on October 8, 2024 and sell it today you would earn a total of  338.00  from holding Take Two Interactive Software or generate 1.9% 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.  Constellation Brands

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.

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Take-Two Interactive and Constellation Brands

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

The idea behind Take Two Interactive Software and Constellation Brands 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.