Correlation Between Toys R and MA Financial
Can any of the company-specific risk be diversified away by investing in both Toys R and MA 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 MA 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 MA Financial Group, you can compare the effects of market volatilities on Toys R and MA 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 MA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and MA Financial.
Diversification Opportunities for Toys R and MA Financial
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Toys and MAF is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and MA Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MA Financial Group 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 MA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MA Financial Group has no effect on the direction of Toys R i.e., Toys R and MA Financial go up and down completely randomly.
Pair Corralation between Toys R and MA Financial
Assuming the 90 days trading horizon Toys R Us is expected to generate 2.82 times more return on investment than MA Financial. However, Toys R is 2.82 times more volatile than MA Financial Group. It trades about -0.1 of its potential returns per unit of risk. MA Financial Group is currently generating about -0.27 per unit of risk. If you would invest 5.50 in Toys R Us on September 13, 2024 and sell it today you would lose (0.70) from holding Toys R Us or give up 12.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toys R Us vs. MA Financial Group
Performance |
| Timeline |
| Toys R Us |
| MA Financial Group |
Toys R and MA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and MA Financial
The main advantage of trading using opposite Toys R and MA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, MA 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 MA Financial will offset losses from the drop in MA 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 |
| MA Financial vs. Westpac Banking | MA Financial vs. National Australia Bank | MA Financial vs. National Australia Bank | MA Financial vs. National Australia Bank |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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