Correlation Between SAN MIGUEL and Toll Brothers

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

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

Diversification Opportunities for SAN MIGUEL and Toll Brothers

0.32

Correlation Coefficient

SAN MIGUEL  Toll Brothers

Weak diversification

The 3 months correlation between SAN and Toll is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SAN MIGUEL BREWERY and Toll Brothers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toll Brothers and SAN MIGUEL 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 SAN MIGUEL BREWERY are associated (or correlated) with Toll Brothers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toll Brothers has no effect on the direction of SAN MIGUEL i.e., SAN MIGUEL and Toll Brothers go up and down completely randomly.

Pair Corralation between SAN MIGUEL and Toll Brothers

Assuming the 90 days trading horizon SAN MIGUEL BREWERY is expected to generate 3.06 times more return on investment than Toll Brothers. However, SAN MIGUEL is 3.06 times more volatile than Toll Brothers. It trades about 0.05 of its potential returns per unit of risk. Toll Brothers is currently generating about 0.09 per unit of risk. If you would invest  5.98  in SAN MIGUEL BREWERY on October 10, 2024 and sell it today you would earn a total of  4.02  from holding SAN MIGUEL BREWERY or generate 67.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

SAN MIGUEL BREWERY  vs.  Toll Brothers

SAN MIGUEL BREWERY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAN MIGUEL BREWERY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Toll Brothers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toll Brothers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SAN MIGUEL and Toll Brothers

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

The idea behind SAN MIGUEL BREWERY and Toll Brothers 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.