Correlation Between Stella Jones and Toromont Industries
Can any of the company-specific risk be diversified away by investing in both Stella Jones and Toromont 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 Stella Jones and Toromont Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stella Jones and Toromont Industries, you can compare the effects of market volatilities on Stella Jones and Toromont 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 Stella Jones with a short position of Toromont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stella Jones and Toromont Industries.
Diversification Opportunities for Stella Jones and Toromont Industries
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stella and Toromont is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Stella Jones and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and Stella Jones 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 Stella Jones are associated (or correlated) with Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of Stella Jones i.e., Stella Jones and Toromont Industries go up and down completely randomly.
Pair Corralation between Stella Jones and Toromont Industries
Assuming the 90 days horizon Stella Jones is expected to under-perform the Toromont Industries. In addition to that, Stella Jones is 3.43 times more volatile than Toromont Industries. It trades about -0.25 of its total potential returns per unit of risk. Toromont Industries is currently generating about -0.42 per unit of volatility. If you would invest 12,728 in Toromont Industries on August 28, 2024 and sell it today you would lose (1,067) from holding Toromont Industries or give up 8.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stella Jones vs. Toromont Industries
Performance |
| Timeline |
| Stella Jones |
| Toromont Industries |
Stella Jones and Toromont Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stella Jones and Toromont Industries
The main advantage of trading using opposite Stella Jones and Toromont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stella Jones position performs unexpectedly, Toromont 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 Toromont Industries will offset losses from the drop in Toromont Industries' long position.| Stella Jones vs. Richelieu Hardware | Stella Jones vs. CCL Industries | Stella Jones vs. Stantec | Stella Jones vs. Gildan Activewear |
| Toromont Industries vs. Finning International | Toromont Industries vs. Stantec | Toromont Industries vs. Ritchie Bros Auctioneers | Toromont Industries vs. CCL Industries |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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