Correlation Between Take Two and Activision Blizzard

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

Diversification Opportunities for Take Two and Activision Blizzard

0.87

Correlation Coefficient

Take Two  Activision Blizzard

Very poor diversification

The 3 months correlation between Take and Activision is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Activision Blizzard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Activision Blizzard 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 Activision Blizzard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Activision Blizzard has no effect on the direction of Take Two i.e., Take Two and Activision Blizzard go up and down completely randomly.

Pair Corralation between Take Two and Activision Blizzard

If you would invest  16,171  in Take Two Interactive Software on August 30, 2024 and sell it today you would earn a total of  2,385  from holding Take Two Interactive Software or generate 14.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Take Two Interactive Software  vs.  Activision Blizzard

Take Two Interactive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Take Two displayed solid returns over the last few months and may actually be approaching a breakup point.

Activision Blizzard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Activision Blizzard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Activision Blizzard is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Take Two and Activision Blizzard

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

The idea behind Take Two Interactive Software and Activision Blizzard 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.