Correlation Between Mattel and JAKKS Pacific

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

By analyzing existing cross correlation between Mattel Inc and JAKKS Pacific, you can compare the effects of market volatilities on Mattel and JAKKS Pacific 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 Mattel with a short position of JAKKS Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mattel and JAKKS Pacific.

Diversification Opportunities for Mattel and JAKKS Pacific

0.28

Correlation Coefficient

Mattel  JAKKS Pacific

Modest diversification

The 3 months correlation between Mattel and JAKKS is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and JAKKS Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAKKS Pacific and Mattel 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 Mattel Inc are associated (or correlated) with JAKKS Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAKKS Pacific has no effect on the direction of Mattel i.e., Mattel and JAKKS Pacific go up and down completely randomly.

Pair Corralation between Mattel and JAKKS Pacific

Considering the 90-day investment horizon Mattel Inc is expected to generate 0.85 times more return on investment than JAKKS Pacific. However, Mattel Inc is 1.17 times less risky than JAKKS Pacific. It trades about 0.09 of its potential returns per unit of risk. JAKKS Pacific is currently generating about -0.03 per unit of risk. If you would invest  1,768  in Mattel Inc on December 28, 2024 and sell it today you would earn a total of  208.00  from holding Mattel Inc or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Mattel Inc  vs.  JAKKS Pacific

Mattel Inc

Risk-Adjusted Performance

Modest

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

JAKKS Pacific

Risk-Adjusted Performance

Very Weak

Over the last 90 days JAKKS Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Mattel and JAKKS Pacific

The main advantage of trading using opposite Mattel and JAKKS Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mattel position performs unexpectedly, JAKKS Pacific 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 JAKKS Pacific will offset losses from the drop in JAKKS Pacific's long position.

The idea behind Mattel Inc and JAKKS Pacific 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.