Correlation Between Toys R and Farm Pride
Can any of the company-specific risk be diversified away by investing in both Toys R and Farm Pride 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 Farm Pride 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 Farm Pride Foods, you can compare the effects of market volatilities on Toys R and Farm Pride 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 Farm Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Farm Pride.
Diversification Opportunities for Toys R and Farm Pride
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Toys and Farm is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Farm Pride Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farm Pride Foods 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 Farm Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farm Pride Foods has no effect on the direction of Toys R i.e., Toys R and Farm Pride go up and down completely randomly.
Pair Corralation between Toys R and Farm Pride
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Farm Pride. In addition to that, Toys R is 1.03 times more volatile than Farm Pride Foods. It trades about -0.1 of its total potential returns per unit of risk. Farm Pride Foods is currently generating about -0.05 per unit of volatility. If you would invest 13.00 in Farm Pride Foods on September 13, 2024 and sell it today you would lose (1.00) from holding Farm Pride Foods or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. Farm Pride Foods
Performance |
| Timeline |
| Toys R Us |
| Farm Pride Foods |
Toys R and Farm Pride Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and Farm Pride
The main advantage of trading using opposite Toys R and Farm Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Farm Pride 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 Farm Pride will offset losses from the drop in Farm Pride'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 |
| Farm Pride vs. Aneka Tambang Tbk | Farm Pride vs. Macquarie Group | Farm Pride vs. Macquarie Group Ltd | Farm Pride vs. Challenger |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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