Correlation Between Cboe UK and Thor Industries

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Can any of the company-specific risk be diversified away by investing in both Cboe UK and Thor Industries 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 Cboe UK and Thor Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cboe UK Consumer and Thor Industries, you can compare the effects of market volatilities on Cboe UK and Thor Industries 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 Cboe UK with a short position of Thor Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and Thor Industries.

Diversification Opportunities for Cboe UK and Thor Industries

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cboe and Thor is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Cboe UK i.e., Cboe UK and Thor Industries go up and down completely randomly.
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Pair Corralation between Cboe UK and Thor Industries

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 0.37 times more return on investment than Thor Industries. However, Cboe UK Consumer is 2.71 times less risky than Thor Industries. It trades about 0.18 of its potential returns per unit of risk. Thor Industries is currently generating about 0.06 per unit of risk. If you would invest  2,650,940  in Cboe UK Consumer on September 19, 2024 and sell it today you would earn a total of  599,189  from holding Cboe UK Consumer or generate 22.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy90.63%
ValuesDaily Returns

Cboe UK Consumer  vs.  Thor Industries

 Performance 
       Timeline  

Cboe UK and Thor Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cboe UK and Thor Industries

The main advantage of trading using opposite Cboe UK and Thor Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cboe UK position performs unexpectedly, Thor Industries 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 Thor Industries will offset losses from the drop in Thor Industries' long position.
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The idea behind Cboe UK Consumer and Thor Industries 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.

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