Correlation Between Playmates Toys and Nucor

Can any of the company-specific risk be diversified away by investing in both Playmates Toys and Nucor 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 Playmates Toys and Nucor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Playmates Toys Limited and Nucor, you can compare the effects of market volatilities on Playmates Toys and Nucor 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 Playmates Toys with a short position of Nucor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playmates Toys and Nucor.

Diversification Opportunities for Playmates Toys and Nucor

0.01

Correlation Coefficient

Playmates Toys  Nucor

Significant diversification

The 3 months correlation between Playmates and Nucor is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Playmates Toys Limited and Nucor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nucor and Playmates Toys 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 Playmates Toys Limited are associated (or correlated) with Nucor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nucor has no effect on the direction of Playmates Toys i.e., Playmates Toys and Nucor go up and down completely randomly.

Pair Corralation between Playmates Toys and Nucor

Assuming the 90 days horizon Playmates Toys Limited is expected to generate 0.9 times more return on investment than Nucor. However, Playmates Toys Limited is 1.11 times less risky than Nucor. It trades about 0.08 of its potential returns per unit of risk. Nucor is currently generating about -0.37 per unit of risk. If you would invest  6.40  in Playmates Toys Limited on October 10, 2024 and sell it today you would earn a total of  0.20  from holding Playmates Toys Limited or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Playmates Toys Limited  vs.  Nucor

Playmates Toys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playmates Toys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Playmates Toys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nucor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nucor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Playmates Toys and Nucor

The main advantage of trading using opposite Playmates Toys and Nucor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playmates Toys position performs unexpectedly, Nucor 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 Nucor will offset losses from the drop in Nucor's long position.

The idea behind Playmates Toys Limited and Nucor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.