Correlation Between Cracker Barrel and Toro

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

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

Diversification Opportunities for Cracker Barrel and Toro

0.11

Correlation Coefficient

Cracker Barrel  Toro

Average diversification

The 3 months correlation between Cracker and Toro is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cracker Barrel Old and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Cracker Barrel 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 Cracker Barrel Old are associated (or correlated) with Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of Cracker Barrel i.e., Cracker Barrel and Toro go up and down completely randomly.

Pair Corralation between Cracker Barrel and Toro

Given the investment horizon of 90 days Cracker Barrel Old is expected to under-perform the Toro. In addition to that, Cracker Barrel is 1.45 times more volatile than Toro Co. It trades about -0.04 of its total potential returns per unit of risk. Toro Co is currently generating about -0.02 per unit of volatility. If you would invest  10,362  in Toro Co on October 5, 2024 and sell it today you would lose (2,375) from holding Toro Co or give up 22.92% of portfolio value over 90 days.

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

Cracker Barrel Old  vs.  Toro Co

Cracker Barrel Old

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cracker Barrel Old are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Cracker Barrel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cracker Barrel and Toro

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

The idea behind Cracker Barrel Old and Toro Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.