Correlation Between Toys R and Truscott Mining

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

Diversification Opportunities for Toys R and Truscott Mining

-0.07

Correlation Coefficient

Toys R  Truscott Mining

Good diversification

The 3 months correlation between Toys and Truscott is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Truscott Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truscott Mining Corp 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 Truscott Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truscott Mining Corp has no effect on the direction of Toys R i.e., Toys R and Truscott Mining go up and down completely randomly.

Pair Corralation between Toys R and Truscott Mining

Assuming the 90 days trading horizon Toys R Us is expected to generate 1.2 times more return on investment than Truscott Mining. However, Toys R is 1.2 times more volatile than Truscott Mining Corp. It trades about 0.02 of its potential returns per unit of risk. Truscott Mining Corp is currently generating about -0.01 per unit of risk. If you would invest  4.70  in Toys R Us on December 4, 2024 and sell it today you would lose (0.20) from holding Toys R Us or give up 4.26% of portfolio value over 90 days.

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

Toys R Us  vs.  Truscott Mining Corp

Toys R Us

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toys R Us are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Toys R is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Truscott Mining Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truscott Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Truscott Mining 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 Truscott Mining

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

The idea behind Toys R Us and Truscott Mining Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.