Correlation Between Techtronic Industries and Toro

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

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

Diversification Opportunities for Techtronic Industries and Toro

0.67

Correlation Coefficient

Techtronic Industries  Toro

Poor diversification

The 3 months correlation between Techtronic and Toro is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Techtronic Industries and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Techtronic Industries 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 Techtronic Industries 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 Techtronic Industries i.e., Techtronic Industries and Toro go up and down completely randomly.

Pair Corralation between Techtronic Industries and Toro

Assuming the 90 days trading horizon Techtronic Industries is expected to generate 1.31 times more return on investment than Toro. However, Techtronic Industries is 1.31 times more volatile than Toro Co. It trades about -0.07 of its potential returns per unit of risk. Toro Co is currently generating about -0.14 per unit of risk. If you would invest  1,229  in Techtronic Industries on December 21, 2024 and sell it today you would lose (130.00) from holding Techtronic Industries or give up 10.58% of portfolio value over 90 days.

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

Techtronic Industries  vs.  Toro Co

Techtronic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Techtronic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Techtronic Industries and Toro

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

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