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

0.52

Correlation Coefficient

Stanley Black  Toro

Very weak diversification

The 3 months correlation between Stanley and Toro is 0.52. 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

Considering the 90-day investment horizon Stanley Black Decker is expected to generate 1.01 times more return on investment than Toro. However, Stanley Black is 1.01 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 -0.05 per unit of risk. If you would invest  7,905  in Stanley Black Decker on December 28, 2024 and sell it today you would lose (134.00) from holding Stanley Black Decker or give up 1.7% of portfolio value over 90 days.

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

Stanley Black Decker  vs.  Toro Co

Stanley Black Decker

Risk-Adjusted Performance

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 quite persistent basic indicators, Stanley Black is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Toro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.