Correlation Between Masco and Toto
Can any of the company-specific risk be diversified away by investing in both Masco and Toto 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 Masco and Toto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masco and Toto, you can compare the effects of market volatilities on Masco and Toto 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 Masco with a short position of Toto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco and Toto.
Diversification Opportunities for Masco and Toto
Very weak diversification
The 3 months correlation between Masco and Toto is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Toto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toto and Masco 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 Masco are associated (or correlated) with Toto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toto has no effect on the direction of Masco i.e., Masco and Toto go up and down completely randomly.
Pair Corralation between Masco and Toto
Considering the 90-day investment horizon Masco is expected to generate 0.74 times more return on investment than Toto. However, Masco is 1.35 times less risky than Toto. It trades about 0.07 of its potential returns per unit of risk. Toto is currently generating about 0.02 per unit of risk. If you would invest 6,241 in Masco on September 2, 2024 and sell it today you would earn a total of 1,815 from holding Masco or generate 29.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Masco vs. Toto
Performance |
| Timeline |
| Masco |
| Toto |
Masco and Toto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Masco and Toto
The main advantage of trading using opposite Masco and Toto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco position performs unexpectedly, Toto 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 Toto will offset losses from the drop in Toto's long position.| Masco vs. Trane Technologies plc | Masco vs. Quanex Building Products | Masco vs. Jeld Wen Holding | Masco vs. Azek Company |
| Toto vs. Lixil Group Corp | Toto vs. Toray Industries ADR | Toto vs. Secom Co Ltd | Toto vs. Nitto Denko Corp |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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