Correlation Between Take-Two Interactive and Arrowhead Pharma

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Can any of the company-specific risk be diversified away by investing in both Take-Two Interactive and Arrowhead Pharma 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 Arrowhead Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Take-Two Interactive and Arrowhead Pharma, you can compare the effects of market volatilities on Take-Two Interactive and Arrowhead Pharma 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 Arrowhead Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Take-Two Interactive and Arrowhead Pharma.

Diversification Opportunities for Take-Two Interactive and Arrowhead Pharma

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Take-Two and Arrowhead is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Take-Two Interactive and Arrowhead Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowhead Pharma 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 are associated (or correlated) with Arrowhead Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowhead Pharma has no effect on the direction of Take-Two Interactive i.e., Take-Two Interactive and Arrowhead Pharma go up and down completely randomly.

Pair Corralation between Take-Two Interactive and Arrowhead Pharma

Given the investment horizon of 90 days Take-Two Interactive is expected to under-perform the Arrowhead Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Take-Two Interactive is 1.26 times less risky than Arrowhead Pharma. The stock trades about -0.21 of its potential returns per unit of risk. The Arrowhead Pharma is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,319  in Arrowhead Pharma on August 28, 2022 and sell it today you would lose (369.00)  from holding Arrowhead Pharma or give up 11.12% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Take-Two Interactive  vs.  Arrowhead Pharma

 Performance (%) 
       Timeline  
Take-Two Interactive 
Take-Two Performance
0 of 100
Over the last 90 days Take-Two Interactive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Take-Two Price Channel

Arrowhead Pharma 
Arrowhead Performance
0 of 100
Over the last 90 days Arrowhead Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Arrowhead Price Channel

Take-Two Interactive and Arrowhead Pharma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Take-Two Interactive and Arrowhead Pharma

The main advantage of trading using opposite Take-Two Interactive and Arrowhead Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take-Two Interactive position performs unexpectedly, Arrowhead Pharma 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 Arrowhead Pharma will offset losses from the drop in Arrowhead Pharma's long position.
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The idea behind Take-Two Interactive and Arrowhead Pharma 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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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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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