Correlation Between Australian United and Toys R

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

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

Diversification Opportunities for Australian United and Toys R

0.61

Correlation Coefficient

Australian United  Toys R

Poor diversification

The 3 months correlation between Australian and Toys is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Australian United Investment and Toys R Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toys R Us and Australian United 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 Australian United Investment are associated (or correlated) with Toys R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toys R Us has no effect on the direction of Australian United i.e., Australian United and Toys R go up and down completely randomly.

Pair Corralation between Australian United and Toys R

Assuming the 90 days trading horizon Australian United is expected to generate 2.3 times less return on investment than Toys R. But when comparing it to its historical volatility, Australian United Investment is 12.28 times less risky than Toys R. It trades about 0.04 of its potential returns per unit of risk. Toys R Us is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Toys R Us on October 4, 2024 and sell it today you would lose (24.10) from holding Toys R Us or give up 80.33% of portfolio value over 90 days.

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

Australian United Investment  vs.  Toys R Us

Australian United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian United Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Australian United is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Toys R Us

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toys R Us has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Australian United and Toys R

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

The idea behind Australian United Investment and Toys R Us 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.