Correlation Between Toro and Snap-on Incorporated
Can any of the company-specific risk be diversified away by investing in both Toro and Snap-on Incorporated 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 Toro and Snap-on Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toro Co and Snap on Incorporated, you can compare the effects of market volatilities on Toro and Snap-on Incorporated 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 Toro with a short position of Snap-on Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and Snap-on Incorporated.
Diversification Opportunities for Toro and Snap-on Incorporated
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Toro and Snap-on is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Snap on Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap-on Incorporated and Toro 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 Toro Co are associated (or correlated) with Snap-on Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap-on Incorporated has no effect on the direction of Toro i.e., Toro and Snap-on Incorporated go up and down completely randomly.
Pair Corralation between Toro and Snap-on Incorporated
Assuming the 90 days horizon Toro is expected to generate 2.64 times less return on investment than Snap-on Incorporated. In addition to that, Toro is 1.52 times more volatile than Snap on Incorporated. It trades about 0.02 of its total potential returns per unit of risk. Snap on Incorporated is currently generating about 0.1 per unit of volatility. If you would invest 25,217 in Snap on Incorporated on September 2, 2024 and sell it today you would earn a total of 9,653 from holding Snap on Incorporated or generate 38.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toro Co vs. Snap on Incorporated
Performance |
| Timeline |
| Toro |
| Snap-on Incorporated |
Toro and Snap-on Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toro and Snap-on Incorporated
The main advantage of trading using opposite Toro and Snap-on Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro position performs unexpectedly, Snap-on Incorporated 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 Snap-on Incorporated will offset losses from the drop in Snap-on Incorporated's long position.The idea behind Toro Co and Snap on Incorporated pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Snap-on Incorporated vs. Brockhaus Capital Management | Snap-on Incorporated vs. Darden Restaurants | Snap-on Incorporated vs. Digilife Technologies Limited | Snap-on Incorporated vs. BJs Restaurants |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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