Correlation Between Kirby and Toro

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

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

Diversification Opportunities for Kirby and Toro

0.73

Correlation Coefficient

Kirby  Toro

Poor diversification

The 3 months correlation between Kirby and Toro is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kirby and Toro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Kirby 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 Kirby 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 Kirby i.e., Kirby and Toro go up and down completely randomly.

Pair Corralation between Kirby and Toro

Considering the 90-day investment horizon Kirby is expected to generate 0.69 times more return on investment than Toro. However, Kirby is 1.45 times less risky than Toro. It trades about -0.02 of its potential returns per unit of risk. Toro is currently generating about -0.07 per unit of risk. If you would invest  10,598  in Kirby on December 27, 2024 and sell it today you would lose (255.00) from holding Kirby or give up 2.41% of portfolio value over 90 days.

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

Kirby  vs.  Toro

Kirby

Risk-Adjusted Performance

Very Weak

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

Toro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Kirby and Toro

The main advantage of trading using opposite Kirby and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kirby 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 Kirby and Toro 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.