Correlation Between Toys R and G8 Education
Can any of the company-specific risk be diversified away by investing in both Toys R and G8 Education 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 G8 Education 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 G8 Education, you can compare the effects of market volatilities on Toys R and G8 Education 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 G8 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and G8 Education.
Diversification Opportunities for Toys R and G8 Education
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Toys and GEM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and G8 Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 Education 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 G8 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 Education has no effect on the direction of Toys R i.e., Toys R and G8 Education go up and down completely randomly.
Pair Corralation between Toys R and G8 Education
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the G8 Education. In addition to that, Toys R is 3.45 times more volatile than G8 Education. It trades about -0.1 of its total potential returns per unit of risk. G8 Education is currently generating about 0.05 per unit of volatility. If you would invest 135.00 in G8 Education on September 13, 2024 and sell it today you would earn a total of 2.00 from holding G8 Education or generate 1.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. G8 Education
Performance |
| Timeline |
| Toys R Us |
| G8 Education |
Toys R and G8 Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and G8 Education
The main advantage of trading using opposite Toys R and G8 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, G8 Education 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 G8 Education will offset losses from the drop in G8 Education'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 |
| G8 Education vs. Southern Cross Gold | G8 Education vs. Minbos Resources | G8 Education vs. Tlou Energy | G8 Education vs. Encounter 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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