Correlation Between Real Good and Toray Industries

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

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

Diversification Opportunities for Real Good and Toray Industries

-0.47

Correlation Coefficient

Real Good  Toray Industries

Very good diversification

The 3 months correlation between Real and Toray is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Real Good Food and Toray Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries and Real Good 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 Real Good Food are associated (or correlated) with Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries has no effect on the direction of Real Good i.e., Real Good and Toray Industries go up and down completely randomly.

Pair Corralation between Real Good and Toray Industries

Considering the 90-day investment horizon Real Good Food is expected to generate 141.55 times more return on investment than Toray Industries. However, Real Good is 141.55 times more volatile than Toray Industries. It trades about 0.12 of its potential returns per unit of risk. Toray Industries is currently generating about 0.12 per unit of risk. If you would invest  282.00  in Real Good Food on December 22, 2024 and sell it today you would lose (268.00) from holding Real Good Food or give up 95.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.67%
Values	Daily Returns

Real Good Food  vs.  Toray Industries

Real Good Food

Risk-Adjusted Performance

OK

Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Real Good reported solid returns over the last few months and may actually be approaching a breakup point.

Toray Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toray Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Toray Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Real Good and Toray Industries

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

The idea behind Real Good Food and Toray 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.