Correlation Between Adient PLC and Toro Energy

Can any of the company-specific risk be diversified away by investing in both Adient PLC and Toro Energy 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 Adient PLC and Toro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adient PLC and Toro Energy Limited, you can compare the effects of market volatilities on Adient PLC and Toro Energy 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 Adient PLC with a short position of Toro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and Toro Energy.

Diversification Opportunities for Adient PLC and Toro Energy

0.47

Correlation Coefficient

Adient PLC  Toro Energy

Very weak diversification

The 3 months correlation between Adient and Toro is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Toro Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro Energy Limited and Adient PLC 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 Adient PLC are associated (or correlated) with Toro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro Energy Limited has no effect on the direction of Adient PLC i.e., Adient PLC and Toro Energy go up and down completely randomly.

Pair Corralation between Adient PLC and Toro Energy

Given the investment horizon of 90 days Adient PLC is expected to under-perform the Toro Energy. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 16.97 times less risky than Toro Energy. The stock trades about -0.07 of its potential returns per unit of risk. The Toro Energy Limited is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Toro Energy Limited on October 25, 2024 and sell it today you would earn a total of  5.00  from holding Toro Energy Limited or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	33.33%
Values	Daily Returns

Adient PLC  vs.  Toro Energy Limited

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Toro Energy Limited

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Toro Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly conflicting basic indicators, Toro Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Adient PLC and Toro Energy

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

The idea behind Adient PLC and Toro Energy Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.