Correlation Between Postal Realty and Toro

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

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

Diversification Opportunities for Postal Realty and Toro

0.55

Correlation Coefficient

Postal Realty  Toro

Very weak diversification

The 3 months correlation between Postal and Toro is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Postal Realty Trust and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Postal 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 Postal Realty Trust 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 Postal Realty i.e., Postal Realty and Toro go up and down completely randomly.

Pair Corralation between Postal Realty and Toro

Given the investment horizon of 90 days Postal Realty Trust is expected to under-perform the Toro. But the stock apears to be less risky and, when comparing its historical volatility, Postal Realty Trust is 1.41 times less risky than Toro. The stock trades about -0.06 of its potential returns per unit of risk. The Toro Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,044  in Toro Co on November 19, 2024 and sell it today you would earn a total of  10.00  from holding Toro Co or generate 0.12% return on investment over 90 days.

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

Postal Realty Trust  vs.  Toro Co

Postal Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Postal Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Postal Realty is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Toro

Risk-Adjusted Performance

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 Postal Realty and Toro

The main advantage of trading using opposite Postal Realty and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Realty 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 Postal Realty Trust 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.