Correlation Between Toys R and Xero
Can any of the company-specific risk be diversified away by investing in both Toys R and Xero 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 Xero 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 Xero, you can compare the effects of market volatilities on Toys R and Xero 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 Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Xero.
Diversification Opportunities for Toys R and Xero
Pay attention - limited upside
The 3 months correlation between Toys and Xero is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero 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 Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Toys R i.e., Toys R and Xero go up and down completely randomly.
Pair Corralation between Toys R and Xero
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Xero. In addition to that, Toys R is 3.7 times more volatile than Xero. It trades about -0.15 of its total potential returns per unit of risk. Xero is currently generating about -0.16 per unit of volatility. If you would invest 17,880 in Xero on December 1, 2024 and sell it today you would lose (807.00) from holding Xero or give up 4.51% 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. Xero
Performance |
| Timeline |
| Toys R Us |
| Xero |
Toys R and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toys R and Xero
The main advantage of trading using opposite Toys R and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.| Toys R vs. Australian United Investment | Toys R vs. K2 Asset Management | Toys R vs. Flagship Investments | Toys R vs. Pinnacle Investment Management |
| Xero vs. Clime Investment Management | Xero vs. MotorCycle Holdings | Xero vs. Hudson Investment Group | Xero vs. Charter Hall Retail |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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