Correlation Between IMPERIAL TOBACCO and Toro
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and Toro 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 IMPERIAL TOBACCO and Toro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Toro Co, you can compare the effects of market volatilities on IMPERIAL TOBACCO and Toro 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 IMPERIAL TOBACCO with a short position of Toro. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Toro.
Diversification Opportunities for IMPERIAL TOBACCO and Toro
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IMPERIAL and Toro is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Toro go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Toro
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.37 times more return on investment than Toro. However, IMPERIAL TOBACCO is 2.67 times less risky than Toro. It trades about 0.48 of its potential returns per unit of risk. Toro Co is currently generating about 0.17 per unit of risk. If you would invest 2,760 in IMPERIAL TOBACCO on September 4, 2024 and sell it today you would earn a total of 337.00 from holding IMPERIAL TOBACCO or generate 12.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. Toro Co
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| Toro |
IMPERIAL TOBACCO and Toro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Toro
The main advantage of trading using opposite IMPERIAL TOBACCO and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, Toro 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 Toro will offset losses from the drop in Toro's long position.| IMPERIAL TOBACCO vs. TOTAL GABON | IMPERIAL TOBACCO vs. Walgreens Boots Alliance | IMPERIAL TOBACCO vs. Peak Resources Limited |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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