Correlation Between Toys R and Beach Energy
Can any of the company-specific risk be diversified away by investing in both Toys R and Beach Energy 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 Beach Energy 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 Beach Energy, you can compare the effects of market volatilities on Toys R and Beach Energy 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 Beach Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Beach Energy.
Diversification Opportunities for Toys R and Beach Energy
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Toys and Beach is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Beach Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beach Energy 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 Beach Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beach Energy has no effect on the direction of Toys R i.e., Toys R and Beach Energy go up and down completely randomly.
Pair Corralation between Toys R and Beach Energy
Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Beach Energy. In addition to that, Toys R is 2.44 times more volatile than Beach Energy. It trades about -0.04 of its total potential returns per unit of risk. Beach Energy is currently generating about 0.12 per unit of volatility. If you would invest 123.00 in Beach Energy on October 9, 2024 and sell it today you would earn a total of 19.00 from holding Beach Energy or generate 15.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Toys R Us vs. Beach Energy
Performance |
Timeline |
Toys R Us |
Beach Energy |
Toys R and Beach Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Toys R and Beach Energy
The main advantage of trading using opposite Toys R and Beach Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toys R position performs unexpectedly, Beach Energy 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 Beach Energy will offset losses from the drop in Beach Energy's long position.Toys R vs. Commonwealth Bank of | Toys R vs. COG Financial Services | Toys R vs. REGAL ASIAN INVESTMENTS | Toys R vs. Pinnacle Investment Management |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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