Correlation Between New Horizon and Toro

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

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

Diversification Opportunities for New Horizon and Toro

-0.32

Correlation Coefficient

New Horizon  Toro

Very good diversification

The 3 months correlation between New and Toro is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding New Horizon Aircraft and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and New Horizon 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 New Horizon Aircraft 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 New Horizon i.e., New Horizon and Toro go up and down completely randomly.

Pair Corralation between New Horizon and Toro

Assuming the 90 days horizon New Horizon Aircraft is expected to generate 20.83 times more return on investment than Toro. However, New Horizon is 20.83 times more volatile than Toro Co. It trades about 0.21 of its potential returns per unit of risk. Toro Co is currently generating about -0.31 per unit of risk. If you would invest  3.99  in New Horizon Aircraft on October 11, 2024 and sell it today you would earn a total of  2.49  from holding New Horizon Aircraft or generate 62.41% return on investment over 90 days.

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

New Horizon Aircraft  vs.  Toro Co

New Horizon Aircraft

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, New Horizon showed 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 New Horizon and Toro

The main advantage of trading using opposite New Horizon and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Horizon 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 New Horizon Aircraft 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.