Correlation Between TOMI Environmental and Federal Signal
Can any of the company-specific risk be diversified away by investing in both TOMI Environmental and Federal Signal 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 TOMI Environmental and Federal Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOMI Environmental Solutions and Federal Signal, you can compare the effects of market volatilities on TOMI Environmental and Federal Signal 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 TOMI Environmental with a short position of Federal Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOMI Environmental and Federal Signal.
Diversification Opportunities for TOMI Environmental and Federal Signal
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TOMI and Federal is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding TOMI Environmental Solutions and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal and TOMI Environmental 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 TOMI Environmental Solutions are associated (or correlated) with Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of TOMI Environmental i.e., TOMI Environmental and Federal Signal go up and down completely randomly.
Pair Corralation between TOMI Environmental and Federal Signal
Given the investment horizon of 90 days TOMI Environmental Solutions is expected to under-perform the Federal Signal. In addition to that, TOMI Environmental is 1.74 times more volatile than Federal Signal. It trades about -0.18 of its total potential returns per unit of risk. Federal Signal is currently generating about 0.25 per unit of volatility. If you would invest 8,525 in Federal Signal on August 26, 2024 and sell it today you would earn a total of 1,062 from holding Federal Signal or generate 12.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TOMI Environmental Solutions vs. Federal Signal
Performance |
| Timeline |
| TOMI Environmental |
| Federal Signal |
TOMI Environmental and Federal Signal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TOMI Environmental and Federal Signal
The main advantage of trading using opposite TOMI Environmental and Federal Signal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOMI Environmental position performs unexpectedly, Federal Signal 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 Federal Signal will offset losses from the drop in Federal Signal's long position.| TOMI Environmental vs. Genpact Limited | TOMI Environmental vs. Broadridge Financial Solutions | TOMI Environmental vs. First Advantage Corp | TOMI Environmental vs. Franklin Covey |
| Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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