Correlation Between Toro and Acco Brands
Can any of the company-specific risk be diversified away by investing in both Toro and Acco Brands 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 Acco Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toro Co and Acco Brands, you can compare the effects of market volatilities on Toro and Acco Brands 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 Acco Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and Acco Brands.
Diversification Opportunities for Toro and Acco Brands
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Toro and Acco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands 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 Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Toro i.e., Toro and Acco Brands go up and down completely randomly.
Pair Corralation between Toro and Acco Brands
Considering the 90-day investment horizon Toro Co is expected to under-perform the Acco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Toro Co is 1.11 times less risky than Acco Brands. The stock trades about -0.01 of its potential returns per unit of risk. The Acco Brands is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 469.00 in Acco Brands on August 30, 2024 and sell it today you would earn a total of 112.00 from holding Acco Brands or generate 23.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toro Co vs. Acco Brands
Performance |
| Timeline |
| Toro |
| Acco Brands |
Toro and Acco Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toro and Acco Brands
The main advantage of trading using opposite Toro and Acco Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro position performs unexpectedly, Acco Brands 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 Acco Brands will offset losses from the drop in Acco Brands' long position.The idea behind Toro Co and Acco Brands 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.| Acco Brands vs. HNI Corp | Acco Brands vs. Steelcase | Acco Brands vs. Ennis Inc | Acco Brands vs. Acacia Research |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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