Correlation Between Solo Brands and Toll Brothers
Can any of the company-specific risk be diversified away by investing in both Solo Brands and Toll Brothers 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 Solo Brands and Toll Brothers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solo Brands and Toll Brothers, you can compare the effects of market volatilities on Solo Brands and Toll Brothers 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 Solo Brands with a short position of Toll Brothers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solo Brands and Toll Brothers.
Diversification Opportunities for Solo Brands and Toll Brothers
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solo and Toll is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Solo Brands and Toll Brothers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toll Brothers and Solo Brands 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 Solo Brands are associated (or correlated) with Toll Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toll Brothers has no effect on the direction of Solo Brands i.e., Solo Brands and Toll Brothers go up and down completely randomly.
Pair Corralation between Solo Brands and Toll Brothers
Considering the 90-day investment horizon Solo Brands is expected to under-perform the Toll Brothers. In addition to that, Solo Brands is 1.73 times more volatile than Toll Brothers. It trades about -0.07 of its total potential returns per unit of risk. Toll Brothers is currently generating about 0.01 per unit of volatility. If you would invest 13,940 in Toll Brothers on November 2, 2024 and sell it today you would earn a total of 129.00 from holding Toll Brothers or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solo Brands vs. Toll Brothers
Performance |
| Timeline |
| Solo Brands |
| Toll Brothers |
Solo Brands and Toll Brothers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solo Brands and Toll Brothers
The main advantage of trading using opposite Solo Brands and Toll Brothers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solo Brands position performs unexpectedly, Toll Brothers 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 Toll Brothers will offset losses from the drop in Toll Brothers' long position.| Solo Brands vs. Qurate Retail Series | Solo Brands vs. Hour Loop | Solo Brands vs. 1StdibsCom | Solo Brands vs. Baozun Inc |
| Toll Brothers vs. DR Horton | Toll Brothers vs. Lennar | Toll Brothers vs. KB Home | Toll Brothers vs. NVR Inc |
Check out your portfolio center.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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