Correlation Between Toys R and Latitude Financial
Can any of the company-specific risk be diversified away by investing in both Toys R and Latitude Financial 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 Latitude Financial 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 Latitude Financial Services, you can compare the effects of market volatilities on Toys R and Latitude Financial 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 Latitude Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Latitude Financial.
Diversification Opportunities for Toys R and Latitude Financial
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toys and Latitude is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Latitude Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latitude Financial 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 Latitude Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latitude Financial has no effect on the direction of Toys R i.e., Toys R and Latitude Financial go up and down completely randomly.
Pair Corralation between Toys R and Latitude Financial
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Latitude Financial. In addition to that, Toys R is 7.01 times more volatile than Latitude Financial Services. It trades about -0.08 of its total potential returns per unit of risk. Latitude Financial Services is currently generating about 0.0 per unit of volatility. If you would invest 115.00 in Latitude Financial Services on September 13, 2024 and sell it today you would earn a total of 0.00 from holding Latitude Financial Services or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. Latitude Financial Services
Performance |
| Timeline |
| Toys R Us |
| Latitude Financial |
Toys R and Latitude Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and Latitude Financial
The main advantage of trading using opposite Toys R and Latitude Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Latitude Financial 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 Latitude Financial will offset losses from the drop in Latitude Financial'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 |
| Latitude Financial vs. Aneka Tambang Tbk | Latitude Financial vs. Commonwealth Bank | Latitude Financial vs. BHP Group Limited | Latitude Financial vs. Rio Tinto |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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