Correlation Between Toromont Industries and Russel Metals
Can any of the company-specific risk be diversified away by investing in both Toromont Industries and Russel Metals 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 Russel Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toromont Industries and Russel Metals, you can compare the effects of market volatilities on Toromont Industries and Russel Metals 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 Russel Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toromont Industries and Russel Metals.
Diversification Opportunities for Toromont Industries and Russel Metals
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Toromont and Russel is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Russel Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russel Metals 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 Russel Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russel Metals has no effect on the direction of Toromont Industries i.e., Toromont Industries and Russel Metals go up and down completely randomly.
Pair Corralation between Toromont Industries and Russel Metals
Assuming the 90 days trading horizon Toromont Industries is expected to generate 1.92 times less return on investment than Russel Metals. But when comparing it to its historical volatility, Toromont Industries is 1.34 times less risky than Russel Metals. It trades about 0.03 of its potential returns per unit of risk. Russel Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,310 in Russel Metals on November 2, 2024 and sell it today you would earn a total of 941.00 from holding Russel Metals or generate 28.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toromont Industries vs. Russel Metals
Performance |
| Timeline |
| Toromont Industries |
| Russel Metals |
Toromont Industries and Russel Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toromont Industries and Russel Metals
The main advantage of trading using opposite Toromont Industries and Russel Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toromont Industries position performs unexpectedly, Russel Metals 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 Russel Metals will offset losses from the drop in Russel Metals' long position.| Toromont Industries vs. Finning International | Toromont Industries vs. Stantec | Toromont Industries vs. Ritchie Bros Auctioneers | Toromont Industries vs. CCL Industries |
| Russel Metals vs. Finning International | Russel Metals vs. Transcontinental | Russel Metals vs. Toromont Industries | Russel Metals vs. IGM Financial |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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