Correlation Between Getty Realty and Toro Energy

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

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

Diversification Opportunities for Getty Realty and Toro Energy

0.6

Correlation Coefficient

Getty Realty  Toro Energy

Poor diversification

The 3 months correlation between Getty and Toro is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Getty Realty 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 Getty Realty 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 Getty Realty 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 Getty Realty i.e., Getty Realty and Toro Energy go up and down completely randomly.

Pair Corralation between Getty Realty and Toro Energy

Considering the 90-day investment horizon Getty Realty is expected to under-perform the Toro Energy. But the stock apears to be less risky and, when comparing its historical volatility, Getty Realty is 11.51 times less risky than Toro Energy. The stock trades about -0.04 of its potential returns per unit of risk. The Toro Energy Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Toro Energy Limited on October 4, 2024 and sell it today you would lose (1.00) from holding Toro Energy Limited or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Getty Realty  vs.  Toro Energy Limited

Getty Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Getty Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Getty Realty is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Toro Energy Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Energy Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Getty Realty and Toro Energy

The main advantage of trading using opposite Getty Realty and Toro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Getty Realty 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 Getty Realty 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.