Correlation Between WIMFARM SA and Toromont Industries

Can any of the company-specific risk be diversified away by investing in both WIMFARM SA and Toromont Industries 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 WIMFARM SA and Toromont Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WIMFARM SA EO and Toromont Industries, you can compare the effects of market volatilities on WIMFARM SA and Toromont Industries 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 WIMFARM SA with a short position of Toromont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIMFARM SA and Toromont Industries.

Diversification Opportunities for WIMFARM SA and Toromont Industries

0.41

Correlation Coefficient

WIMFARM SA  Toromont Industries

Very weak diversification

The 3 months correlation between WIMFARM and Toromont is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding WIMFARM SA EO and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and WIMFARM SA 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 WIMFARM SA EO are associated (or correlated) with Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of WIMFARM SA i.e., WIMFARM SA and Toromont Industries go up and down completely randomly.

Pair Corralation between WIMFARM SA and Toromont Industries

Assuming the 90 days horizon WIMFARM SA EO is expected to generate 1.28 times more return on investment than Toromont Industries. However, WIMFARM SA is 1.28 times more volatile than Toromont Industries. It trades about 0.05 of its potential returns per unit of risk. Toromont Industries is currently generating about -0.07 per unit of risk. If you would invest  355.00  in WIMFARM SA EO on October 11, 2024 and sell it today you would earn a total of  30.00  from holding WIMFARM SA EO or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

WIMFARM SA EO  vs.  Toromont Industries

WIMFARM SA EO

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WIMFARM SA EO are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WIMFARM SA reported solid returns over the last few months and may actually be approaching a breakup point.

Toromont Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toromont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with WIMFARM SA and Toromont Industries

The main advantage of trading using opposite WIMFARM SA and Toromont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIMFARM SA position performs unexpectedly, Toromont Industries 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 Toromont Industries will offset losses from the drop in Toromont Industries' long position.

The idea behind WIMFARM SA EO and Toromont Industries 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.