Correlation Between Sphere Entertainment and Toro Energy

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

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

Diversification Opportunities for Sphere Entertainment and Toro Energy

-0.22

Correlation Coefficient

Sphere Entertainment  Toro Energy

Very good diversification

The 3 months correlation between Sphere and Toro is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and Toro Energy go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Toro Energy

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Toro Energy. But the stock apears to be less risky and, when comparing its historical volatility, Sphere Entertainment Co is 5.07 times less risky than Toro Energy. The stock trades about -0.08 of its potential returns per unit of risk. The Toro Energy Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Toro Energy Limited on December 20, 2024 and sell it today you would earn a total of  1.00  from holding Toro Energy Limited or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.85%
Values	Daily Returns

Sphere Entertainment Co  vs.  Toro Energy Limited

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Toro Energy Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sphere Entertainment and Toro Energy

The main advantage of trading using opposite Sphere Entertainment and Toro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.