Correlation Between IShares Global and Toys R

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

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

Diversification Opportunities for IShares Global and Toys R

-0.78

Correlation Coefficient

IShares Global  Toys R

Pay attention - limited upside

The 3 months correlation between IShares and Toys is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare 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 IShares Global 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 iShares Global Healthcare 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 IShares Global i.e., IShares Global and Toys R go up and down completely randomly.

Pair Corralation between IShares Global and Toys R

Assuming the 90 days trading horizon iShares Global Healthcare is expected to generate 0.15 times more return on investment than Toys R. However, iShares Global Healthcare is 6.72 times less risky than Toys R. It trades about -0.06 of its potential returns per unit of risk. Toys R Us is currently generating about -0.2 per unit of risk. If you would invest  14,592  in iShares Global Healthcare on November 28, 2024 and sell it today you would lose (134.00) from holding iShares Global Healthcare or give up 0.92% of portfolio value over 90 days.

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

iShares Global Healthcare  vs.  Toys R Us

iShares Global Healthcare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Healthcare are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking indicators, IShares Global 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

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

Pair Trading with IShares Global and Toys R

The main advantage of trading using opposite IShares Global and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 iShares Global Healthcare 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.