Correlation Between Take-Two Interactive and North American

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

Diversification Opportunities for Take-Two Interactive and North American

0.43

Correlation Coefficient

Take-Two Interactive  North American

Very weak diversification

The 3 months correlation between Take-Two and North is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and North American go up and down completely randomly.

Pair Corralation between Take-Two Interactive and North American

Assuming the 90 days horizon Take-Two Interactive is expected to generate 47.0 times less return on investment than North American. But when comparing it to its historical volatility, Take Two Interactive Software is 1.45 times less risky than North American. It trades about 0.0 of its potential returns per unit of risk. North American Construction is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,323  in North American Construction on April 25, 2025 and sell it today you would lose (13.00) from holding North American Construction or give up 0.98% of portfolio value over 90 days.

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

Take Two Interactive Software  vs.  North American Construction

Take Two Interactive

Risk-Adjusted Performance

Very Weak

Over the last 90 days Take Two Interactive Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Take-Two Interactive is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

North American Const

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, North American is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Take-Two Interactive and North American

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

The idea behind Take Two Interactive Software and North American Construction 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.