Correlation Between Take Two and Nasdaq

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

Diversification Opportunities for Take Two and Nasdaq

0.77

Correlation Coefficient

Take Two  Nasdaq

Poor diversification

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

Pair Corralation between Take Two and Nasdaq

Given the investment horizon of 90 days Take Two Interactive Software is expected to generate 1.51 times more return on investment than Nasdaq. However, Take Two is 1.51 times more volatile than Nasdaq Inc. It trades about 0.23 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.18 per unit of risk. If you would invest  15,271  in Take Two Interactive Software on August 18, 2024 and sell it today you would earn a total of  2,491  from holding Take Two Interactive Software or generate 16.31% 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.  Nasdaq Inc

Take Two Interactive

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 13 (%) 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.

Nasdaq Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Take Two and Nasdaq

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

The idea behind Take Two Interactive Software and Nasdaq Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.