Correlation Between Waste Management and Take Two

Can any of the company-specific risk be diversified away by investing in both Waste Management and Take Two 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 Waste Management and Take Two into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waste Management and Take Two Interactive Software, you can compare the effects of market volatilities on Waste Management and Take Two 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 Waste Management with a short position of Take Two. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and Take Two.

Diversification Opportunities for Waste Management and Take Two

0.62

Correlation Coefficient

Waste Management  Take Two

Poor diversification

The 3 months correlation between Waste and Take is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive and Waste Management 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 Waste Management are associated (or correlated) with Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of Waste Management i.e., Waste Management and Take Two go up and down completely randomly.

Pair Corralation between Waste Management and Take Two

Assuming the 90 days trading horizon Waste Management is expected to generate 1.8 times less return on investment than Take Two. But when comparing it to its historical volatility, Waste Management is 2.81 times less risky than Take Two. It trades about 0.07 of its potential returns per unit of risk. Take Two Interactive Software is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  28,594  in Take Two Interactive Software on December 30, 2024 and sell it today you would earn a total of  1,606  from holding Take Two Interactive Software or generate 5.62% return on investment over 90 days.

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

Waste Management  vs.  Take Two Interactive Software

Waste Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Take Two Interactive

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Take Two may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Waste Management and Take Two

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

The idea behind Waste Management and Take Two Interactive Software 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.