Correlation Between Macquarie and Toys R

Can any of the company-specific risk be diversified away by investing in both Macquarie and Toys R 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 Macquarie and Toys R into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macquarie Group and Toys R Us, you can compare the effects of market volatilities on Macquarie and Toys R 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 Macquarie with a short position of Toys R. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macquarie and Toys R.

Diversification Opportunities for Macquarie and Toys R

-0.52

Correlation Coefficient

Macquarie  Toys R

Excellent diversification

The 3 months correlation between Macquarie and Toys is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group and Toys R Us in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toys R Us and Macquarie 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 Macquarie Group are associated (or correlated) with Toys R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toys R Us has no effect on the direction of Macquarie i.e., Macquarie and Toys R go up and down completely randomly.

Pair Corralation between Macquarie and Toys R

Assuming the 90 days trading horizon Macquarie Group is expected to generate 0.28 times more return on investment than Toys R. However, Macquarie Group is 3.58 times less risky than Toys R. It trades about 0.1 of its potential returns per unit of risk. Toys R Us is currently generating about -0.12 per unit of risk. If you would invest  21,457  in Macquarie Group on August 31, 2024 and sell it today you would earn a total of  1,654  from holding Macquarie Group or generate 7.71% return on investment over 90 days.

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

Macquarie Group  vs.  Toys R Us

Macquarie Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Macquarie may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Macquarie and Toys R

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

The idea behind Macquarie Group and Toys R Us 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.