Correlation Between Take-Two Interactive and Sotherly Hotels

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

Diversification Opportunities for Take-Two Interactive and Sotherly Hotels

0.71

Correlation Coefficient

Take-Two Interactive  Sotherly Hotels

Poor diversification

The 3 months correlation between Take-Two and Sotherly is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels 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 Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Take-Two Interactive and Sotherly Hotels

Assuming the 90 days horizon Take Two Interactive Software is expected to under-perform the Sotherly Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Take Two Interactive Software is 4.61 times less risky than Sotherly Hotels. The stock trades about -0.07 of its potential returns per unit of risk. The Sotherly Hotels is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Sotherly Hotels on April 8, 2025 and sell it today you would earn a total of  6.00  from holding Sotherly Hotels or generate 8.57% 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.  Sotherly Hotels

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 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Take-Two Interactive may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Sotherly Hotels

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sotherly Hotels are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sotherly Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take-Two Interactive and Sotherly Hotels

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

The idea behind Take Two Interactive Software and Sotherly Hotels 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.