Correlation Between Toys R and Pinnacle Investment

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

Diversification Opportunities for Toys R and Pinnacle Investment

-0.92

Correlation Coefficient

Toys R  Pinnacle Investment

Pay attention - limited upside

The 3 months correlation between Toys and Pinnacle is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Pinnacle Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Investment 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 Pinnacle Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Investment has no effect on the direction of Toys R i.e., Toys R and Pinnacle Investment go up and down completely randomly.

Pair Corralation between Toys R and Pinnacle Investment

Assuming the 90 days trading horizon Toys R Us is expected to under-perform the Pinnacle Investment. In addition to that, Toys R is 4.13 times more volatile than Pinnacle Investment Management. It trades about -0.01 of its total potential returns per unit of risk. Pinnacle Investment Management is currently generating about 0.2 per unit of volatility. If you would invest  891.00  in Pinnacle Investment Management on September 14, 2024 and sell it today you would earn a total of  1,460  from holding Pinnacle Investment Management or generate 163.86% return on investment over 90 days.

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

Toys R Us  vs.  Pinnacle Investment Management

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

Pinnacle Investment

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Toys R and Pinnacle Investment

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

The idea behind Toys R Us and Pinnacle Investment Management 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.