Correlation Between Toys R and Skycity Entertainment

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

Diversification Opportunities for Toys R and Skycity Entertainment

0.01

Correlation Coefficient

Toys R  Skycity Entertainment

Significant diversification

The 3 months correlation between Toys and Skycity is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Skycity Entertainment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skycity Entertainment 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 Skycity Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skycity Entertainment has no effect on the direction of Toys R i.e., Toys R and Skycity Entertainment go up and down completely randomly.

Pair Corralation between Toys R and Skycity Entertainment

Assuming the 90 days trading horizon Toys R Us is expected to generate 2.61 times more return on investment than Skycity Entertainment. However, Toys R is 2.61 times more volatile than Skycity Entertainment Group. It trades about 0.07 of its potential returns per unit of risk. Skycity Entertainment Group is currently generating about 0.06 per unit of risk. If you would invest  5.20  in Toys R Us on September 15, 2024 and sell it today you would earn a total of  0.30  from holding Toys R Us or generate 5.77% return on investment over 90 days.

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

Toys R Us  vs.  Skycity Entertainment 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Skycity Entertainment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skycity Entertainment Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Skycity Entertainment 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 Skycity Entertainment

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

The idea behind Toys R Us and Skycity Entertainment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.