Correlation Between Toys R and Advanced Braking
Can any of the company-specific risk be diversified away by investing in both Toys R and Advanced Braking 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 Toys R and Advanced Braking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toys R Us and Advanced Braking Technology, you can compare the effects of market volatilities on Toys R and Advanced Braking 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 Toys R with a short position of Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Advanced Braking.
Diversification Opportunities for Toys R and Advanced Braking
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Toys and Advanced is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and Toys R 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 Toys R Us are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of Toys R i.e., Toys R and Advanced Braking go up and down completely randomly.
Pair Corralation between Toys R and Advanced Braking
Assuming the 90 days trading horizon Toys R is expected to generate 4.26 times less return on investment than Advanced Braking. In addition to that, Toys R is 2.98 times more volatile than Advanced Braking Technology. It trades about 0.0 of its total potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.06 per unit of volatility. If you would invest 4.40 in Advanced Braking Technology on September 1, 2024 and sell it today you would earn a total of 3.70 from holding Advanced Braking Technology or generate 84.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. Advanced Braking Technology
Performance |
| Timeline |
| Toys R Us |
| Advanced Braking Tec |
Toys R and Advanced Braking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and Advanced Braking
The main advantage of trading using opposite Toys R and Advanced Braking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Advanced Braking 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 Advanced Braking will offset losses from the drop in Advanced Braking's long position.| Toys R vs. iShares Global Healthcare | Toys R vs. Australian Dairy Farms | Toys R vs. Adriatic Metals Plc | Toys R vs. Australian Agricultural |
| Advanced Braking vs. Encounter Resources | Advanced Braking vs. Tlou Energy | Advanced Braking vs. Southern Cross Gold | Advanced Braking vs. Minbos Resources |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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