Correlation Between PLAYMATES TOYS and ROHM Co

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

By analyzing existing cross correlation between PLAYMATES TOYS and ROHM Co, you can compare the effects of market volatilities on PLAYMATES TOYS and ROHM Co 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 ROHM Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYMATES TOYS and ROHM Co.

Diversification Opportunities for PLAYMATES TOYS and ROHM Co

0.3

Correlation Coefficient

PLAYMATES TOYS  ROHM Co

Weak diversification

The 3 months correlation between PLAYMATES and ROHM is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and ROHM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROHM Co 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 are associated (or correlated) with ROHM Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROHM Co has no effect on the direction of PLAYMATES TOYS i.e., PLAYMATES TOYS and ROHM Co go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and ROHM Co

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 2.57 times more return on investment than ROHM Co. However, PLAYMATES TOYS is 2.57 times more volatile than ROHM Co. It trades about 0.08 of its potential returns per unit of risk. ROHM Co is currently generating about -0.05 per unit of risk. If you would invest  1.36  in PLAYMATES TOYS on October 4, 2024 and sell it today you would earn a total of  5.44  from holding PLAYMATES TOYS or generate 400.0% return on investment over 90 days.

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

PLAYMATES TOYS  vs.  ROHM Co

PLAYMATES TOYS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYMATES TOYS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PLAYMATES TOYS unveiled solid returns over the last few months and may actually be approaching a breakup point.

ROHM Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROHM Co 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 ROHM Co

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

The idea behind PLAYMATES TOYS and ROHM Co 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.