Correlation Between Group 6 and Toys R
Can any of the company-specific risk be diversified away by investing in both Group 6 and Toys R 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 Group 6 and Toys R into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 6 Metals and Toys R Us, you can compare the effects of market volatilities on Group 6 and Toys R 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 Group 6 with a short position of Toys R. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 6 and Toys R.
Diversification Opportunities for Group 6 and Toys R
Average diversification
The 3 months correlation between Group and Toys is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Group 6 Metals and Toys R Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toys R Us and Group 6 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 Group 6 Metals are associated (or correlated) with Toys R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toys R Us has no effect on the direction of Group 6 i.e., Group 6 and Toys R go up and down completely randomly.
Pair Corralation between Group 6 and Toys R
Assuming the 90 days trading horizon Group 6 Metals is expected to under-perform the Toys R. But the stock apears to be less risky and, when comparing its historical volatility, Group 6 Metals is 1.62 times less risky than Toys R. The stock trades about -0.05 of its potential returns per unit of risk. The Toys R Us is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Toys R Us on September 3, 2024 and sell it today you would lose (24.80) from holding Toys R Us or give up 82.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 6 Metals vs. Toys R Us
Performance |
| Timeline |
| Group 6 Metals |
| Toys R Us |
Group 6 and Toys R Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 6 and Toys R
The main advantage of trading using opposite Group 6 and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 6 position performs unexpectedly, Toys R 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 Toys R will offset losses from the drop in Toys R's long position.| Group 6 vs. Northern Star Resources | Group 6 vs. Evolution Mining | Group 6 vs. Bluescope Steel | Group 6 vs. Aneka Tambang Tbk |
| Toys R vs. Westpac Banking | Toys R vs. Champion Iron | Toys R vs. iShares Global Healthcare | Toys R vs. Peel Mining |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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