Correlation Between Take Two and National CineMedia

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

Diversification Opportunities for Take Two and National CineMedia

-0.08

Correlation Coefficient

Take Two  National CineMedia

Good diversification

The 3 months correlation between Take and National is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Take Two i.e., Take Two and National CineMedia go up and down completely randomly.

Pair Corralation between Take Two and National CineMedia

Given the investment horizon of 90 days Take Two Interactive Software is expected to generate 0.71 times more return on investment than National CineMedia. However, Take Two Interactive Software is 1.41 times less risky than National CineMedia. It trades about 0.1 of its potential returns per unit of risk. National CineMedia is currently generating about -0.06 per unit of risk. If you would invest  18,138  in Take Two Interactive Software on December 19, 2024 and sell it today you would earn a total of  2,294  from holding Take Two Interactive Software or generate 12.65% return on investment over 90 days.

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

Take Two Interactive Software  vs.  National CineMedia

Take Two Interactive

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 7 (%) 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.

National CineMedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Take Two and National CineMedia

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

The idea behind Take Two Interactive Software and National CineMedia 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.