Correlation Between Toys R and OOhMedia

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

Diversification Opportunities for Toys R and OOhMedia

0.4

Correlation Coefficient

Toys R  OOhMedia

Very weak diversification

The 3 months correlation between Toys and OOhMedia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and oOhMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on oOhMedia 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 OOhMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of oOhMedia has no effect on the direction of Toys R i.e., Toys R and OOhMedia go up and down completely randomly.

Pair Corralation between Toys R and OOhMedia

Assuming the 90 days trading horizon Toys R Us is expected to generate 3.08 times more return on investment than OOhMedia. However, Toys R is 3.08 times more volatile than oOhMedia. It trades about 0.18 of its potential returns per unit of risk. oOhMedia is currently generating about -0.23 per unit of risk. If you would invest  5.00  in Toys R Us on October 4, 2024 and sell it today you would earn a total of  0.90  from holding Toys R Us or generate 18.0% return on investment over 90 days.

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

Toys R Us  vs.  oOhMedia

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.

oOhMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days oOhMedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential 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 OOhMedia

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

The idea behind Toys R Us and oOhMedia 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.