Correlation Between Take-Two Interactive and GMO Internet

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

Diversification Opportunities for Take-Two Interactive and GMO Internet

0.49

Correlation Coefficient

Take-Two Interactive  GMO Internet

Very weak diversification

The 3 months correlation between Take-Two and GMO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and GMO Internet go up and down completely randomly.

Pair Corralation between Take-Two Interactive and GMO Internet

Assuming the 90 days horizon Take-Two Interactive is expected to generate 6.44 times less return on investment than GMO Internet. But when comparing it to its historical volatility, Take Two Interactive Software is 4.48 times less risky than GMO Internet. It trades about 0.05 of its potential returns per unit of risk. GMO Internet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  447.00  in GMO Internet on October 4, 2024 and sell it today you would earn a total of  1,153  from holding GMO Internet or generate 257.94% return on investment over 90 days.

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

Take Two Interactive Software  vs.  GMO Internet

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.

GMO Internet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet 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 GMO Internet

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

The idea behind Take Two Interactive Software and GMO Internet 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 Anywhere module to track or share privately all of your investments from the convenience of any device.