Correlation Between Stanley Black and Toro

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

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

Diversification Opportunities for Stanley Black and Toro

-0.46

Correlation Coefficient

Stanley Black  Toro

Very good diversification

The 3 months correlation between Stanley and Toro is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Stanley Black Decker and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Stanley Black 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 Stanley Black Decker 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 Stanley Black i.e., Stanley Black and Toro go up and down completely randomly.

Pair Corralation between Stanley Black and Toro

Assuming the 90 days horizon Stanley Black Decker is expected to generate 1.32 times more return on investment than Toro. However, Stanley Black is 1.32 times more volatile than Toro Co. It trades about -0.01 of its potential returns per unit of risk. Toro Co is currently generating about -0.34 per unit of risk. If you would invest  7,962  in Stanley Black Decker on October 12, 2024 and sell it today you would lose (48.00) from holding Stanley Black Decker or give up 0.6% of portfolio value over 90 days.

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

Stanley Black Decker  vs.  Toro Co

Stanley Black Decker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stanley Black Decker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Toro

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Toro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stanley Black and Toro

The main advantage of trading using opposite Stanley Black and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stanley Black 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 Stanley Black Decker 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.