Correlation Between Toys R and Dexus Convenience

Can any of the company-specific risk be diversified away by investing in both Toys R and Dexus Convenience 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 Dexus Convenience 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 Dexus Convenience Retail, you can compare the effects of market volatilities on Toys R and Dexus Convenience 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 Dexus Convenience. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toys R and Dexus Convenience.

Diversification Opportunities for Toys R and Dexus Convenience

0.08

Correlation Coefficient

Toys R  Dexus Convenience

Significant diversification

The 3 months correlation between Toys and Dexus is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Dexus Convenience Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexus Convenience Retail 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 Dexus Convenience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexus Convenience Retail has no effect on the direction of Toys R i.e., Toys R and Dexus Convenience go up and down completely randomly.

Pair Corralation between Toys R and Dexus Convenience

Assuming the 90 days trading horizon Toys R Us is expected to generate 4.76 times more return on investment than Dexus Convenience. However, Toys R is 4.76 times more volatile than Dexus Convenience Retail. It trades about 0.02 of its potential returns per unit of risk. Dexus Convenience Retail is currently generating about 0.0 per unit of risk. If you would invest  4.70  in Toys R Us on December 4, 2024 and sell it today you would lose (0.20) from holding Toys R Us or give up 4.26% of portfolio value over 90 days.

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

Toys R Us  vs.  Dexus Convenience Retail

Toys R Us

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toys R Us are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Toys R is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Dexus Convenience Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dexus Convenience Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Dexus Convenience is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Toys R and Dexus Convenience

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

The idea behind Toys R Us and Dexus Convenience Retail 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.