Correlation Between Ironbark Capital and Toys R

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

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

Diversification Opportunities for Ironbark Capital and Toys R

-0.05

Correlation Coefficient

Ironbark Capital  Toys R

Good diversification

The 3 months correlation between Ironbark and Toys is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ironbark Capital 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 Ironbark Capital 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 Ironbark Capital 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 Ironbark Capital i.e., Ironbark Capital and Toys R go up and down completely randomly.

Pair Corralation between Ironbark Capital and Toys R

Assuming the 90 days trading horizon Ironbark Capital is expected to generate 8.82 times less return on investment than Toys R. But when comparing it to its historical volatility, Ironbark Capital is 10.18 times less risky than Toys R. It trades about 0.24 of its potential returns per unit of risk. Toys R Us is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4.90  in Toys R Us on October 8, 2024 and sell it today you would earn a total of  0.90  from holding Toys R Us or generate 18.37% return on investment over 90 days.

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

Ironbark Capital  vs.  Toys R Us

Ironbark Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ironbark Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ironbark Capital 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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ironbark Capital and Toys R

The main advantage of trading using opposite Ironbark Capital and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ironbark Capital 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 Ironbark Capital 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.