Correlation Between Global Battery and Toro Energy

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

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

Diversification Opportunities for Global Battery and Toro Energy

-0.03

Correlation Coefficient

Global Battery  Toro Energy

Good diversification

The 3 months correlation between Global and Toro is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Global Battery Metals and Toro Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro Energy Limited and Global Battery 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 Global Battery Metals are associated (or correlated) with Toro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro Energy Limited has no effect on the direction of Global Battery i.e., Global Battery and Toro Energy go up and down completely randomly.

Pair Corralation between Global Battery and Toro Energy

Assuming the 90 days horizon Global Battery Metals is expected to generate 1.92 times more return on investment than Toro Energy. However, Global Battery is 1.92 times more volatile than Toro Energy Limited. It trades about -0.01 of its potential returns per unit of risk. Toro Energy Limited is currently generating about -0.45 per unit of risk. If you would invest  1.85  in Global Battery Metals on September 23, 2024 and sell it today you would lose (0.45) from holding Global Battery Metals or give up 24.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

Global Battery Metals  vs.  Toro Energy Limited

Global Battery Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Battery Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Global Battery reported solid returns over the last few months and may actually be approaching a breakup point.

Toro Energy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Battery and Toro Energy

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

The idea behind Global Battery Metals and Toro Energy Limited 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.