Correlation Between Toromont Industries and Finning International
Can any of the company-specific risk be diversified away by investing in both Toromont Industries and Finning International 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 Toromont Industries and Finning International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toromont Industries and Finning International, you can compare the effects of market volatilities on Toromont Industries and Finning International 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 Toromont Industries with a short position of Finning International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toromont Industries and Finning International.
Diversification Opportunities for Toromont Industries and Finning International
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Toromont and Finning is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Finning International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finning International and Toromont Industries 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 Toromont Industries are associated (or correlated) with Finning International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finning International has no effect on the direction of Toromont Industries i.e., Toromont Industries and Finning International go up and down completely randomly.
Pair Corralation between Toromont Industries and Finning International
Assuming the 90 days trading horizon Toromont Industries is expected to under-perform the Finning International. But the stock apears to be less risky and, when comparing its historical volatility, Toromont Industries is 2.39 times less risky than Finning International. The stock trades about -0.42 of its potential returns per unit of risk. The Finning International is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest 4,179 in Finning International on August 28, 2024 and sell it today you would lose (357.00) from holding Finning International or give up 8.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toromont Industries vs. Finning International
Performance |
| Timeline |
| Toromont Industries |
| Finning International |
Toromont Industries and Finning International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toromont Industries and Finning International
The main advantage of trading using opposite Toromont Industries and Finning International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toromont Industries position performs unexpectedly, Finning International 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 Finning International will offset losses from the drop in Finning International's long position.| Toromont Industries vs. Finning International | Toromont Industries vs. Stantec | Toromont Industries vs. Ritchie Bros Auctioneers | Toromont Industries vs. CCL Industries |
| Finning International vs. Toromont Industries | Finning International vs. Ritchie Bros Auctioneers | Finning International vs. Stantec | Finning International vs. Transcontinental |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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