Correlation Between Toys R and Lendlease

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

Diversification Opportunities for Toys R and Lendlease

0.1

Correlation Coefficient

Toys R  Lendlease

Average diversification

The 3 months correlation between Toys and Lendlease is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Lendlease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendlease Group 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 Lendlease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendlease Group has no effect on the direction of Toys R i.e., Toys R and Lendlease go up and down completely randomly.

Pair Corralation between Toys R and Lendlease

Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Lendlease. In addition to that, Toys R is 3.5 times more volatile than Lendlease Group. It trades about -0.06 of its total potential returns per unit of risk. Lendlease Group is currently generating about -0.09 per unit of volatility. If you would invest  692.00  in Lendlease Group on October 21, 2024 and sell it today you would lose (64.00) from holding Lendlease Group or give up 9.25% 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.  Lendlease Group

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lendlease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendlease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Toys R and Lendlease

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

The idea behind Toys R Us and Lendlease Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.