Correlation Between Toys R and Aussie Broadband

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

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

Diversification Opportunities for Toys R and Aussie Broadband

-0.76

Correlation Coefficient

Toys R  Aussie Broadband

Pay attention - limited upside

The 3 months correlation between Toys and Aussie is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Aussie Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aussie Broadband and Toys R 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 Toys R Us are associated (or correlated) with Aussie Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aussie Broadband has no effect on the direction of Toys R i.e., Toys R and Aussie Broadband go up and down completely randomly.

Pair Corralation between Toys R and Aussie Broadband

Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Aussie Broadband. In addition to that, Toys R is 2.78 times more volatile than Aussie Broadband. It trades about -0.11 of its total potential returns per unit of risk. Aussie Broadband is currently generating about 0.12 per unit of volatility. If you would invest  356.00  in Aussie Broadband on December 29, 2024 and sell it today you would earn a total of  53.00  from holding Aussie Broadband or generate 14.89% return on investment over 90 days.

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

Toys R Us  vs.  Aussie Broadband

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.

Aussie Broadband

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aussie Broadband are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Aussie Broadband unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toys R and Aussie Broadband

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

The idea behind Toys R Us and Aussie Broadband 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.