Correlation Between Energy Resources and Toys R

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

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

Diversification Opportunities for Energy Resources and Toys R

0.23

Correlation Coefficient

Energy Resources  Toys R

Modest diversification

The 3 months correlation between Energy and Toys is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Energy Resources 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 Energy Resources 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 Energy Resources 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 Energy Resources i.e., Energy Resources and Toys R go up and down completely randomly.

Pair Corralation between Energy Resources and Toys R

Assuming the 90 days trading horizon Energy Resources is expected to under-perform the Toys R. In addition to that, Energy Resources is 1.39 times more volatile than Toys R Us. It trades about -0.13 of its total potential returns per unit of risk. Toys R Us is currently generating about 0.03 per unit of volatility. If you would invest  4.50  in Toys R Us on December 4, 2024 and sell it today you would earn a total of  0.00  from holding Toys R Us or generate 0.0% return on investment over 90 days.

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

Energy Resources  vs.  Toys R Us

Energy Resources

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Energy Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Toys R Us

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toys R Us are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Toys R is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Energy Resources and Toys R

The main advantage of trading using opposite Energy Resources and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Resources 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 Energy Resources 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 Commodity Directory module to find actively traded commodities issued by global exchanges.