Correlation Between Take-Two Interactive and Direct Line

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

Diversification Opportunities for Take-Two Interactive and Direct Line

0.33

Correlation Coefficient

Take-Two Interactive  Direct Line

Weak diversification

The 3 months correlation between Take-Two and Direct is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line Insurance and Take-Two Interactive 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and Direct Line go up and down completely randomly.

Pair Corralation between Take-Two Interactive and Direct Line

Assuming the 90 days horizon Take-Two Interactive is expected to generate 2.13 times less return on investment than Direct Line. In addition to that, Take-Two Interactive is 2.14 times more volatile than Direct Line Insurance. It trades about 0.06 of its total potential returns per unit of risk. Direct Line Insurance is currently generating about 0.29 per unit of volatility. If you would invest  325.00  in Direct Line Insurance on April 23, 2025 and sell it today you would earn a total of  34.00  from holding Direct Line Insurance or generate 10.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.37%
Values	Daily Returns

Take Two Interactive Software  vs.  Direct Line Insurance

Take Two Interactive

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Take-Two Interactive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Direct Line Insurance

Risk-Adjusted Performance

Solid

Over the last 90 days Direct Line Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady essential indicators, Direct Line reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take-Two Interactive and Direct Line

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

The idea behind Take Two Interactive Software and Direct Line Insurance 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.