Correlation Between Toys R and Dicker Data
Can any of the company-specific risk be diversified away by investing in both Toys R and Dicker Data 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 Dicker Data 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 Dicker Data, you can compare the effects of market volatilities on Toys R and Dicker Data 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 Dicker Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Dicker Data.
Diversification Opportunities for Toys R and Dicker Data
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Toys and Dicker is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Dicker Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicker Data 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 Dicker Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicker Data has no effect on the direction of Toys R i.e., Toys R and Dicker Data go up and down completely randomly.
Pair Corralation between Toys R and Dicker Data
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Dicker Data. In addition to that, Toys R is 3.25 times more volatile than Dicker Data. It trades about -0.17 of its total potential returns per unit of risk. Dicker Data is currently generating about -0.15 per unit of volatility. If you would invest 933.00 in Dicker Data on September 13, 2024 and sell it today you would lose (91.00) from holding Dicker Data or give up 9.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. Dicker Data
Performance |
| Timeline |
| Toys R Us |
| Dicker Data |
Toys R and Dicker Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and Dicker Data
The main advantage of trading using opposite Toys R and Dicker Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Dicker Data 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 Dicker Data will offset losses from the drop in Dicker Data's long position.| Toys R vs. Insignia Financial | Toys R vs. MA Financial Group | Toys R vs. Ras Technology Holdings | Toys R vs. Credit Clear |
| Dicker Data vs. Energy Resources | Dicker Data vs. 88 Energy | Dicker Data vs. Amani Gold | Dicker Data vs. A1 Investments 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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