Correlation Between Insurance Australia and Toys R

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

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

Diversification Opportunities for Insurance Australia and Toys R

0.55

Correlation Coefficient

Insurance Australia  Toys R

Very weak diversification

The 3 months correlation between Insurance and Toys is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group 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 Insurance Australia 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 Insurance Australia Group 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 Insurance Australia i.e., Insurance Australia and Toys R go up and down completely randomly.

Pair Corralation between Insurance Australia and Toys R

Assuming the 90 days trading horizon Insurance Australia Group is expected to generate 0.36 times more return on investment than Toys R. However, Insurance Australia Group is 2.78 times less risky than Toys R. It trades about -0.07 of its potential returns per unit of risk. Toys R Us is currently generating about -0.07 per unit of risk. If you would invest  841.00  in Insurance Australia Group on December 23, 2024 and sell it today you would lose (85.00) from holding Insurance Australia Group or give up 10.11% of portfolio value over 90 days.

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

Insurance Australia Group  vs.  Toys R Us

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Toys R Us

Risk-Adjusted Performance

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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Insurance Australia and Toys R

The main advantage of trading using opposite Insurance Australia and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia 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 Insurance Australia Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.