Correlation Between Toys R and Garda Diversified

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

Diversification Opportunities for Toys R and Garda Diversified

-0.83

Correlation Coefficient

Toys R  Garda Diversified

Pay attention - limited upside

The 3 months correlation between Toys and Garda is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Toys R Us and Garda Diversified Ppty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garda Diversified Ppty 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 Garda Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garda Diversified Ppty has no effect on the direction of Toys R i.e., Toys R and Garda Diversified go up and down completely randomly.

Pair Corralation between Toys R and Garda Diversified

Assuming the 90 days trading horizon Toys R Us is expected to generate 6.51 times more return on investment than Garda Diversified. However, Toys R is 6.51 times more volatile than Garda Diversified Ppty. It trades about 0.07 of its potential returns per unit of risk. Garda Diversified Ppty is currently generating about 0.09 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Toys R Us  vs.  Garda Diversified Ppty

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.

Garda Diversified Ppty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garda Diversified Ppty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garda Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toys R and Garda Diversified

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

The idea behind Toys R Us and Garda Diversified Ppty 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.