Correlation Between Take Two and Globalfoundries

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

Diversification Opportunities for Take Two and Globalfoundries

0.77

Correlation Coefficient

Take Two  Globalfoundries

Poor diversification

The 3 months correlation between Take and Globalfoundries is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Take Two i.e., Take Two and Globalfoundries go up and down completely randomly.

Pair Corralation between Take Two and Globalfoundries

Given the investment horizon of 90 days Take Two Interactive Software is expected to generate 0.62 times more return on investment than Globalfoundries. However, Take Two Interactive Software is 1.62 times less risky than Globalfoundries. It trades about 0.08 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.02 per unit of risk. If you would invest  11,331  in Take Two Interactive Software on October 5, 2024 and sell it today you would earn a total of  7,541  from holding Take Two Interactive Software or generate 66.55% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Globalfoundries

Take Two Interactive

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 19 (%) 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.

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Take Two and Globalfoundries

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

The idea behind Take Two Interactive Software and Globalfoundries 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.