Correlation Between RATIONAL Aktiengesellscha and Toromont Industries

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

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

Diversification Opportunities for RATIONAL Aktiengesellscha and Toromont Industries

0.63

Correlation Coefficient

RATIONAL Aktiengesellscha  Toromont Industries

Poor diversification

The 3 months correlation between RATIONAL and Toromont is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding RATIONAL Aktiengesellschaft and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and RATIONAL Aktiengesellscha 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 RATIONAL Aktiengesellschaft are associated (or correlated) with Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of RATIONAL Aktiengesellscha i.e., RATIONAL Aktiengesellscha and Toromont Industries go up and down completely randomly.

Pair Corralation between RATIONAL Aktiengesellscha and Toromont Industries

Assuming the 90 days horizon RATIONAL Aktiengesellschaft is expected to under-perform the Toromont Industries. But the stock apears to be less risky and, when comparing its historical volatility, RATIONAL Aktiengesellschaft is 3.59 times less risky than Toromont Industries. The stock trades about -0.27 of its potential returns per unit of risk. The Toromont Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,845  in Toromont Industries on September 27, 2024 and sell it today you would lose (295.00) from holding Toromont Industries or give up 3.76% of portfolio value over 90 days.

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

RATIONAL Aktiengesellschaft  vs.  Toromont Industries

RATIONAL Aktiengesellscha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RATIONAL Aktiengesellschaft 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.

Toromont Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toromont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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 RATIONAL Aktiengesellscha and Toromont Industries

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

The idea behind RATIONAL Aktiengesellschaft and Toromont Industries 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.