Correlation Between Toys R and Mystate

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

Diversification Opportunities for Toys R and Mystate

-0.74

Correlation Coefficient

Toys R  Mystate

Pay attention - limited upside

The 3 months correlation between Toys and Mystate is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Mystate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mystate 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 Mystate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mystate has no effect on the direction of Toys R i.e., Toys R and Mystate go up and down completely randomly.

Pair Corralation between Toys R and Mystate

Assuming the 90 days trading horizon Toys R Us is expected to generate 6.51 times more return on investment than Mystate. However, Toys R is 6.51 times more volatile than Mystate. It trades about 0.01 of its potential returns per unit of risk. Mystate is currently generating about 0.04 per unit of risk. If you would invest  30.00  in Toys R Us on October 4, 2024 and sell it today you would lose (24.10) from holding Toys R Us or give up 80.33% of portfolio value over 90 days.

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

Toys R Us  vs.  Mystate

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.

Mystate

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mystate are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mystate unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toys R and Mystate

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

The idea behind Toys R Us and Mystate 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.