Correlation Between COG Financial and Toys R

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

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

Diversification Opportunities for COG Financial and Toys R

0.56

Correlation Coefficient

COG Financial  Toys R

Very weak diversification

The 3 months correlation between COG and Toys is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding COG Financial Services 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 COG Financial 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 COG Financial Services 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 COG Financial i.e., COG Financial and Toys R go up and down completely randomly.

Pair Corralation between COG Financial and Toys R

Assuming the 90 days trading horizon COG Financial Services is expected to under-perform the Toys R. But the stock apears to be less risky and, when comparing its historical volatility, COG Financial Services is 4.07 times less risky than Toys R. The stock trades about -0.01 of its potential returns per unit of risk. The Toys R Us is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  34.00  in Toys R Us on October 25, 2024 and sell it today you would lose (29.20) from holding Toys R Us or give up 85.88% of portfolio value over 90 days.

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

COG Financial Services  vs.  Toys R Us

COG Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COG Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, COG Financial 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 COG Financial and Toys R

The main advantage of trading using opposite COG Financial and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COG Financial 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 COG Financial Services 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.