Correlation Between Definitive Healthcare and Toromont Industries

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

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

Diversification Opportunities for Definitive Healthcare and Toromont Industries

-0.04

Correlation Coefficient

Definitive Healthcare  Toromont Industries

Good diversification

The 3 months correlation between Definitive and Toromont is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and Definitive Healthcare 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 Definitive Healthcare Corp 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 Definitive Healthcare i.e., Definitive Healthcare and Toromont Industries go up and down completely randomly.

Pair Corralation between Definitive Healthcare and Toromont Industries

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to generate 2.78 times more return on investment than Toromont Industries. However, Definitive Healthcare is 2.78 times more volatile than Toromont Industries. It trades about 0.09 of its potential returns per unit of risk. Toromont Industries is currently generating about -0.2 per unit of risk. If you would invest  422.00  in Definitive Healthcare Corp on October 26, 2024 and sell it today you would earn a total of  65.00  from holding Definitive Healthcare Corp or generate 15.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Definitive Healthcare Corp  vs.  Toromont Industries

Definitive Healthcare

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Definitive Healthcare demonstrated 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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Definitive Healthcare and Toromont Industries

The main advantage of trading using opposite Definitive Healthcare and Toromont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definitive Healthcare 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 Definitive Healthcare Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.