Correlation Between Take Two and NetSol Technologies

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

Diversification Opportunities for Take Two and NetSol Technologies

-0.87

Correlation Coefficient

Take Two  NetSol Technologies

Pay attention - limited upside

The 3 months correlation between Take and NetSol is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Take Two i.e., Take Two and NetSol Technologies go up and down completely randomly.

Pair Corralation between Take Two and NetSol Technologies

Given the investment horizon of 90 days Take Two Interactive Software is expected to generate 0.8 times more return on investment than NetSol Technologies. However, Take Two Interactive Software is 1.25 times less risky than NetSol Technologies. It trades about -0.15 of its potential returns per unit of risk. NetSol Technologies is currently generating about -0.13 per unit of risk. If you would invest  14,843  in Take Two Interactive Software on January 20, 2024 and sell it today you would lose (779.00) from holding Take Two Interactive Software or give up 5.25% of portfolio value over 90 days.

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

Take Two Interactive Software  vs.  NetSol Technologies

Take Two Interactive

Risk-Adjusted Performance

0 of 100

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. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

NetSol Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, NetSol Technologies disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and NetSol Technologies

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

The idea behind Take Two Interactive Software and NetSol Technologies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.