Correlation Between Toys R and Dexus Convenience
Can any of the company-specific risk be diversified away by investing in both Toys R and Dexus Convenience 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 Dexus Convenience 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 Dexus Convenience Retail, you can compare the effects of market volatilities on Toys R and Dexus Convenience 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 Dexus Convenience. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Dexus Convenience.
Diversification Opportunities for Toys R and Dexus Convenience
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toys and Dexus is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Dexus Convenience Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexus Convenience Retail 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 Dexus Convenience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexus Convenience Retail has no effect on the direction of Toys R i.e., Toys R and Dexus Convenience go up and down completely randomly.
Pair Corralation between Toys R and Dexus Convenience
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Dexus Convenience. In addition to that, Toys R is 4.32 times more volatile than Dexus Convenience Retail. It trades about -0.1 of its total potential returns per unit of risk. Dexus Convenience Retail is currently generating about -0.11 per unit of volatility. If you would invest 297.00 in Dexus Convenience Retail on September 14, 2024 and sell it today you would lose (9.00) from holding Dexus Convenience Retail or give up 3.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. Dexus Convenience Retail
Performance |
| Timeline |
| Toys R Us |
| Dexus Convenience Retail |
Toys R and Dexus Convenience Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and Dexus Convenience
The main advantage of trading using opposite Toys R and Dexus Convenience positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Dexus Convenience 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 Dexus Convenience will offset losses from the drop in Dexus Convenience's long position.| Toys R vs. Energy Resources | Toys R vs. 88 Energy | Toys R vs. Amani Gold | Toys R vs. A1 Investments Resources |
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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 the Global Correlations module to find global opportunities by holding instruments from different markets.
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