Correlation Between Seven West and Toys R

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

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

Diversification Opportunities for Seven West and Toys R

0.78

Correlation Coefficient

Seven West  Toys R

Poor diversification

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

Pair Corralation between Seven West and Toys R

Assuming the 90 days trading horizon Seven West Media is expected to generate 0.73 times more return on investment than Toys R. However, Seven West Media is 1.36 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 -0.08 per unit of risk. If you would invest  18.00  in Seven West Media on September 15, 2024 and sell it today you would lose (3.00) from holding Seven West Media or give up 16.67% of portfolio value over 90 days.

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

Seven West Media  vs.  Toys R Us

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media 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 primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm 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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Seven West and Toys R

The main advantage of trading using opposite Seven West and Toys R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West 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 Seven West Media 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.